Burberry's dropping value puts it at risk of a takeover

Burberry, which has made it its mission to paint London 'Burberry Blue' every fashion season, is now at risk of a takeover since losing a fifth of its value since the beginning of 2024.

A profit warning from Burberry’s rival Kering, the owner of Gucci, Bottega Veneta, YSL and more, triggered a dip in Burberry's shares yesterday. Shares in Kering tumbled 6.8% after warning that operating income was expected to fall by up to 45% in the first half of the year.

With yesterday's 2.5% drop, the British fashion house has now lost nearly 20% of its value since the start of the year. The business is now worth £4 billion.

"Burberry remains a potential takeover target, particularly at its current valuation", Abrdn Investment Manager Sasha Kachanova told The Telegraph.

"As the sole British brand of scale operating independently – a rarity in the luxury industry – it boasts a rich heritage and the opportunity to enhance its iconic product lines and accessories", she continued.

Abrdn is one of Burberry’s top twenty shareholders, although Kachanova doesn’t hold the stock directly.

Last year, Bloomberg conducted a survey of 17 City M&A desks, fund managers and analysts, which uncovered Burberry was among the top companies floated as potential takeover targets (as well as Germany’s Hugo Boss and luxury group Richemont).

It's worth noting that, unlike many luxury brands operating under a larger conglomerate, Burberry operates as a single brand. It usually competes against giants such as LVMH and Kering.

Burberry has been one of the worst performers on the FTSE 100 Index so far this year as demand for luxury goods slows, specifically in Asia. On the flip side, not all luxury fashion houses are facing dipping sales. The Prada Group, which operates Miu Miu and Prada, reported an 18% jump in first-quarter retail sales.