Burberry Faces Uncertainty as Share Price Plummets business, fashion, fashion news

Burberry, the iconic British luxury brand, is grappling with mounting speculation regarding its future trajectory following a series of setbacks. Its recent demotion from the FTSE 100 index has been compounded by a sustained decline in share value, raising concerns about the brand’s long-term positioning.

As of Tuesday morning, Burberry’s share price had plummeted by 73% over the past year and a further 59% in 2024 alone. This translates to a market capitalization of just over £2 billion, a stark contrast to its peak valuation of £9 billion last year. The downward trend continued last week with a near 10% drop, culminating in a 15-year low on Monday. While a slight rebound was observed early Tuesday morning, likely due to bargain hunters capitalizing on the depressed prices, it remains to be seen whether this is indicative of a sustained recovery.

Analysts attribute the persistent decline, in part, to Burberry’s heavy reliance on discounting strategies. Barclays analysts, in a recent assessment, highlighted the detrimental impact of such practices on brand perception. They cited instances where the signature Knight bag was being sold for as low as £820 at Chinese outlets, significantly below its recommended retail price of over £2,000. This aggressive discounting, they argue, undermines the brand’s exclusivity and erodes consumer confidence in paying full price.

Barclays subsequently downgraded Burberry following a series of profit warnings and expressed concerns about the brand’s ability to maintain its high-end luxury positioning given its lack of disciplined pricing strategy. The analysts believe that rebuilding the brand’s credibility on pricing will be a lengthy process, particularly as Burberry has no immediate plans to reduce its presence in outlet stores.

Burberry’s pursuit of an even more upscale image began under former CEO Angela Ahrendts and was continued by her successor, Jonathan Akeroyd. However, with Joshua Schulman, previously CEO of the more accessible luxury brand Coach, now at the helm, speculation abounds regarding a potential shift in strategy.

Despite these concerns, Burberry has remained tight-lipped on its future plans, declining to comment on either its share price performance or its overall strategic direction. Investors and market observers will have to wait until the company’s next set of results for any official pronouncements.