The Burberry (LSE: BRBY) share price has been a horror story for buyers this 12 months. As I write this, it’s down about 45% for the 12 months and about 70% off its all-time highs.

Is the inventory – which is now not a part of the FTSE 100 index – price contemplating as a restoration play for 2025? Let’s focus on.

The basics have modified

The final time I lined Burberry was mid-July. And it’s truthful to say that the basics have modified quite a bit since then.

Again then, Metropolis analysts had been anticipating Burberry to put up earnings per share (EPS) of 51.6p for the 12 months ending 31 March 2025 (FY25) and 65.2p for the next monetary 12 months (FY26). At these figures, the price-to-earnings (P/E) ratios had been 14 and 11, which made the shares look fairly low-cost.

In the present day nevertheless, the consensus earnings forecasts for these two monetary years are simply 3p and 27.5p. In different phrases, analysts have slashed their forecasts dramatically.

So now, we’ve got P/E ratios of 260 and 28. Hastily, the inventory isn’t low-cost in any respect.

I’ll level out that I highlighted the chance of earnings downgrades again in July. That is at all times a threat to pay attention to when firms are struggling, and it stays a threat with Burberry shares as we speak.

China is the important thing to a 2025 restoration

Is there an opportunity of a share price restoration in 2025 although?

Completely. But it surely’s removed from assured.

A lot will rely upon the financial system in China, the place Burberry has generated a whole lot of its gross sales (about 30%) lately. And there’s a good bit of uncertainty on this entrance proper now.

Not too long ago, analysts at Barclays concluded that China is prone to be “weaker for longer”. Their view was that most of the development elements driving the Chinese language into the posh items market, reminiscent of excessive GDP development and property market power, are merely not there.

It’s price noting that Barclays’ analysts additionally expressed considerations about Burberry’s capacity to stay a high-end luxurious model. Given their considerations, they downgraded the inventory to ‘Underweight’ (Promote) and lowered their share price goal to 540p (about 30% under the present share price)

In fact, if stimulus from the Chinese language authorities has a optimistic impression on the financial system and shopper spending, Barclays’ view on China may change into incorrect. This situation may end in a significant increase for Burberry’s gross sales, earnings, and share price.

At this stage, nevertheless, it’s not straightforward to find out what lies forward for China within the quick time period. So, it’s exhausting to know if Burberry shares are able to a restoration in 2025.

Excessive threat, excessive reward

Given the uncertainty, I see Burberry shares as a high-risk, high-reward play on the posh items sector.

If the posh market in China picks up, the shares may expertise a pointy rebound. Conversely, if China stays weak, the shares may hold falling.

Personally, I gained’t be shopping for the shares myself. I’m occupied with getting some extra publicity to this sector, however I believe I’d favor to go together with a extra diversified firm to cut back brand-specific threat.