Burberry has experienced a continued decline in its share price following its recent removal from the elite FTSE 100 share index, raising concerns among analysts about the brand’s future direction.
As of Tuesday morning, Burberry’s shares have dropped 73% over the past year, with a 59% plunge occurring in 2024 alone. The company’s current market value stands at just over £2 billion, a steep drop from its £9 billion valuation at its peak last year.
In the past week alone, Burberry’s stock has fallen nearly 10%, hitting a 15-year low on Monday. However, by early Tuesday, the share price had slightly recovered, likely due to bargain hunters taking advantage of the recent drop. This trend is common following significant stock declines.
Bargain-hunting, however, is also a contributing factor to the brand’s struggles. Analysts from Barclays have noted that Burberry’s increasing reliance on discounts has hurt its reputation. In a report obtained by the Telegraph, Barclays analysts highlighted that Burberry’s Knight bag, which retails for over £2,000, has been sold at outlets in China for as little as £820, damaging the brand’s pricing credibility.
“We believe Burberry’s association with discounting and promotions is highly damaging to its brand positioning,” the analysts stated. “It could take a long time for Burberry to rebuild its credibility, especially since the company doesn’t plan to reduce its reliance on outlets in the short term.”
On Monday, Burberry’s stock decline followed Barclays’ decision to downgrade the company due to repeated profit warnings and concerns about further underperformance. Barclays analysts expressed doubts about Burberry’s ability to maintain its status as a high-end luxury brand, given its lack of a consistent full-price strategy.
Burberry, traditionally known as a luxury brand, shifted its strategy to move further upmarket under previous leadership. This approach was continued by former CEO Jonathan Akeroyd, but with Joshua Schulman, former CEO of Coach, now leading the company, there is speculation that Burberry might reverse course.
Despite the growing concerns, Burberry has not yet commented on its strategy or recent stock performance. The company is expected to provide an update during its next financial results announcement.
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