Driven by the recovery of the Chinese market, Burberry turned profitable in Q2, with quarterly sales growth for the first time in two years | Earnings Report Highlights

Under the bold reforms of CEO Joshua Schulman, the revival plan of British luxury brand Burberry is beginning to show results. Thanks to a rebound in demand from the crucial Chinese market, the company's performance has reached a turning point after a prolonged decline, with core sales indicators returning to growth for the first time in nearly two years and a successful turnaround to profitability.

According to Burberry's financial report released on Thursday, in the second fiscal quarter ending in September, the company's comparable store sales grew by 2% year-on-year, exceeding market expectations. This figure marks the end of a seven-quarter losing streak. Meanwhile, the company achieved an adjusted operating profit of £19 million (approximately $25 million) in the first half, a significant reversal from the £41 million loss in the same period last year.

The market has responded enthusiastically to this positive signal. The financial report shows that sales in regions including China grew by 3% in the past three months, overturning a 5% decline in the previous quarter—this is the first time in over a year that the Chinese market has returned to growth. This performance is seen as important evidence of a rebound in Chinese luxury consumers' spending willingness and has given a strong boost to Burberry's share price, which has risen by 28% so far this year.

"We are beginning to see customers return to the brands they love," CEO Joshua Schulman said in a statement.

First Quarterly Growth in Two Years; Recovery in China Key Driver

Burberry's latest results mark a potential turning point in its business. The 2% comparable store sales growth in the second fiscal quarter not only beats analysts' average expectations of 1%, but more importantly, it breaks the brand's seven-quarter sales decline cycle.

In terms of profitability, the company has also delivered better-than-expected results. The £19 million adjusted operating profit for the first half far exceeds the market average expectation of £12 million. Investor confidence has been reflected in the stock price; in addition to a 28% rise since the beginning of the year, Burberry also rejoined the FTSE 100 index this September, after having been removed from the benchmark earlier in 2024.

The strong recovery in the Chinese market is the core driver of Burberry’s rebound. Sales in regions including China grew by 3% in the latest quarter, marking the first comparable sales increase in the Chinese market in more than a year.

This turnaround shows that Burberry’s new marketing campaigns are reigniting demand among Chinese luxury buyers. In addition, the report specifically highlights that the brand’s iconic outerwear category performed exceptionally well across all regions, demonstrating the strong appeal of its core product line.

New CEO’s Leadership: Focus on Heritage and Cost Reduction

Since taking over as CEO just over a year ago, Joshua Schulman has launched a series of strategic adjustments aimed at reshaping brand appeal and restoring profitability. His core strategy is to bring Burberry back to its roots, with a renewed focus on outerwear products such as trench coats and Scottish tartan scarves that carry a distinct British heritage.

This strategy starkly contrasts with the previous management’s move toward the expensive handbag market, which failed to gain broad consumer recognition. To support the strategic shift, Schulman has also focused on optimizing store displays to better showcase core products and boost sales.

At the same time, the company has implemented strict cost controls. Earlier this year, Burberry announced plans to cut about one-fifth of its workforce to streamline operations. The report shows that restructuring costs related to layoffs amounted to £37 million in the first half.

Citigroup analyst Thomas Chauvet wrote in a report after the financial results:

"All metrics have been achieved, execution is on track. We believe Burberry’s strategic plan is solid. Although patience is still required, the potential upside remains greater than the risks."

As the last luxury company to release quarterly results, Burberry’s data adds new evidence of recovery in industry demand. Next, Richemont, Cartier’s parent company, will report first-half results on Friday, which will provide further reference for industry trends.

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