Burberry should return to underlying sales growth but growth may be slower than hoped

UBS analyst Zuzanna Pusz forecasts Burberry Group PLC will report a return to positive like-for-like sales growth in its upcoming interim results, the first in nearly two years, though at a slower pace than previously anticipated. Despite recent share price weakness attributed to stalling brand momentum, UBS expects improved gross margins from reduced discounting and maintains a 'buy' rating. The firm views Burberry as an attractively valued turnaround play, noting its 0.8x 2026 forecast PE growth rate and a price target implying approximately 40% upside if CEO Jonathan Schulman's brand strategy continues to rebuild momentum.

Analysis

Burberry Group PLC is approaching a pivotal point with its upcoming mid-November interim results, where it is expected to report a return to positive like-for-like (LFL) sales growth for the first time in nearly two years. According to UBS analysis, this recovery will be gradual, with second-quarter retail sales forecast to rise 1% at constant currency, while wholesale revenues are projected to fall 13%, consistent with company guidance. Despite recent share price pressure from concerns over stalling brand momentum, gross margins are anticipated to improve significantly due to reduced discounting and the absence of prior-year inventory provisions. The report's key focus areas will be management's second-half outlook, Chinese consumer demand, performance of the core outerwear category, and pricing actions related to US tariffs. UBS frames the stock as an attractively valued turnaround play, underscored by a 2026 forecast PE growth rate of 0.8x, and maintains a 'buy' rating with a 1,575p price target that suggests almost 40% upside if the brand's momentum rebuilds.

Key Decisions for Investors

• Investors should consider the stock a potential turnaround play, but must be prepared for a gradual recovery as the LFL sales rebound is expected to be slow against the backdrop of a volatile sector.
• The current valuation, highlighted by a 2026 forecast PE growth rate of 0.8x, may present an attractive entry point for those with conviction in the long-term brand strategy and a tolerance for near-term price weakness.
• Ahead of the interim results, focus should be on management's second-half guidance and commentary on Chinese consumer demand, as these will be critical validation points for the turnaround thesis and the stock's potential upside.