Citi upgrades Burberry to “buy,” sees value in brand reset and U.S. growth

Investing.com -- Citi Research in a note dated Thursday has upgraded Burberry Group Plc (LON:BRBY) to “buy” from “neutral,” citing improving brand momentum and growth potential in the United States. 

The brokerage set a new price target of £9.25, down slightly from £9.80, implying a total return of 28.7% including dividends.

The decision follows signs that Burberry’s “Burberry Forward” strategy, which refocuses the brand on classic British design and core categories such as outerwear and scarves, is beginning to resonate. 

Citi’s proprietary survey found strong consumer associations with timeless design and positive purchase intent in the next six months, despite a weaker macro backdrop.

The report projects Burberry will deliver compound annual growth rates of 7% in sales, 56% in adjusted EBIT, and 77% in earnings per share between fiscal years 2026 and 2028. 

Fiscal 2028 EBIT is forecast to reach £364 million, 25% above consensus estimates, with an expected EBIT margin of 13%.

After a 40% drop in share price since February, Burberry trades at roughly 18 times 2026 earnings and 12 times 2027 earnings, levels Citi views as undemanding given its recovery potential. The stock is valued at a discount of about 10% to its luxury peers, excluding Hermès.

Web traffic and social media engagement have improved, with Burberry dominating online searches for trench coats and scarves. 

The company also scored the highest Net Promoter Score among luxury outerwear brands, according to Citi’s survey.

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In their view, Burberry still has a good chance of doing well in the U.S. Although underrepresented there, Burberry could absorb 75% of potential U.S. tariffs through pricing and supply chain changes.

While near-term challenges remain, Citi believes the current valuation reflects overly bearish assumptions and sees scope for long-term upside as the company repositions its image and operations.

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