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The FTSE 100 is home to three stocks in the clothing industry, albeit ones that operate at different price points in the market. One of them is Burberry Group (LSE:BRBY), which targets more affluent shoppers. However, it’s not been a great time for those selling into the luxury goods market.
In its 2025 annual report, Capri Holdings, which last week (2 December) announced that it had sold Versace to Prada, gloomily listed 13 factors — ranging from inflation to war — that had “created a challenging retail environment”.
Against this backdrop, Burberry’s share price is now (8 December) less than half what it was in the spring of 2023.
However, despite the industry’s woes, Prada paid €1.25bn (£1.09bn) for Versace. This is generous for a loss-making company, particularly one that’s experiencing falling revenue and earnings.
| Versace | Year ended 29.3.25 | Year ended 30.3.24 | Year ended 1.4.23 |
|---|---|---|---|
| Revenue ($m) | 821 | 1,030 | 1,106 |
| Gross profit margin (%) | 70.0 | 70.3 | 75.0 |
| Net (loss)/profit ($m) | (54) | 25 | 152 |
A common measure used to approximate the cash flow of a company is EBITDA (earnings before interest, tax, depreciation, and amortisation). Unfortunately, during the year ended 29 March 2025 (FY25), Versace’s EBITDA was negative, which isn’t very helpful when it comes to valuing others in the sector. On the face of it, Prada’s paying over £1bn for a name and associated intellectual property.
Closer to home
As for Burberry, its results over the past three financial years have followed a similar pattern to Versace’s.
| Burberry | Year ended 29.3.25 | Year ended 30.3.24 | Year ended 1.4.23 |
|---|---|---|---|
| Revenue (£m) | 2,461 | 2,968 | 3,094 |
| Gross profit margin (%) | 62.5 | 67.7 | 70.6 |
| Net (loss)/profit (£m) | (75) | 271 | 492 |
But at least it had positive adjusted EBITDA of £483m in FY25. Its current market cap plus net debt (including lease liabilities) means it has an enterprise value (EV) of £5.55bn. This gives it an EV/EBITDA ratio of 11.5, which according to PricewaterhouseCoopers, is exactly in line with the luxury fashion industry average.
Unlike one of its £295 white T-shirts, it looks as though Burberry’s stock is fairly valued at the moment. Although not a bargain, this suggests it will pick up if the luxury fashion market recovers. On this basis, I think it’s one for patient investors to consider.
The FTSE 100 also includes two other fashion stocks. I’m excluding Marks & Spencer and Primark-owner Associated British Foods, as clothing accounts for less than 50% of their revenue.
In recent years, middle-of-the-road Next has bucked the trend and repeatedly upgraded its forecasts. Thanks to improving online sales and overseas expansion, its share price is now 44% higher than it was at the start of 2025. I’d need to do more research before coming to a firm conclusion but with a forecast price-to-earnings multiple of 19, the stock looks a bit pricy to me.
King of trainers
Unlike some of the shoes it sells, JD Sport Fashion’s (LSE:JD.) stock is very cheap. It trades on only seven times forecast current year earnings. For its 2028 financial year, this drops to 5.6.
To achieve a better rating, I think it needs to demonstrate that it can grow organically and not just through acquisition. With consumer incomes being squeezed, like-for-like sales are contracting at the moment. Its also affected by problems at Nike, which has recently implemented a group restructuring and turnaround plan.
However, the British retailer has a clean balance sheet, which means it’s highly cash generative. And it retains a strong brand. This helps it maintain a peer-leading gross profit margin. Next year’s Fifa World Cup should also give it a bit of a boost. On balance, I think it’s worth considering.
