Why Have Burberry Shares Plunged 51% This Year

The once-thriving luxury fashion retailer Burberry (LON: BRBY) has seen its shares plummet by over 50% year-to-date, raising serious concerns among investors and analysts.

Burberry shares are currently trading around the 690p mark, well below the over 2,500p per share highs achieved in April 2023.

This significant downturn, which has seen the stock decline 68% in the last 12 months, can be attributed to a combination of factors, including strategic missteps, leadership changes, and a challenging market environment that has impacted its financial results.

One of the primary reasons for Burberry's struggles lies in its financial performance.

The company recently reported disappointing sales figures and a decline in comparable store sales, leading to a suspension of dividends and potential job cuts.

In its Q1 statement, Burberry revealed comparable store sales came in at -21%, while revenue for the quarter fell 22%.

“Our Q1 FY25 performance is disappointing,” said Gerry Murphy, Chair of Burberry, adding that the luxury market is proving more challenging than expected.

“The weakness we highlighted coming into FY25 has deepened and if the current trend persists through our Q2, we expect to report an operating loss for our first half. In light of current trading, we have decided to suspend dividend payments in respect of FY25,” said Murphy.

The current downturn is especially concerning considering the brand's past success and the overall strength of the luxury goods sector.

Furthermore, the company's leadership instability has also played a role in its decline.

Frequent changes at the top have created uncertainty and hindered the company's ability to execute a coherent strategy. The departure of key executives has further eroded investor confidence.

In addition to its management challenges, Burberry has also faced external pressures. For example, the rise of competitors, changing consumer preferences, and the impact of the pandemic have all contributed to the brand's difficulties.

The company has struggled to reposition itself and appeal to a younger audience, leading to a disconnect with its core customer base.

As Burberry continues to navigate these challenges, it is clear that the road ahead will be difficult.

The company must address its issues, stabilise its leadership, and adapt to the evolving market landscape. Failure to do so could result in further declines and potentially jeopardise the brand's long-term future.