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Burberry is at risk of a takeover, City analysts have warned, after losing a fifth of its value since the start of the year.

A profit warning from Burberry’s Paris-listed rival Kering, which owns Gucci, triggered a slump in the British fashion brand’s shares on Wednesday. The 2.5pc drop means Burberry has lost almost 20pc of its value since the start of the year, leaving the business worth £4bn.

Abrdn investment manager Sasha Kachanova said: “Burberry remains a potential takeover target, particularly at its current valuation.”

A survey of 17 City M&A desks, fund managers and analysts conducted by Bloomberg last year found Burberry was among the top companies floated as potential takeover targets, alongside Germany’s Hugo Boss and Swiss luxury group Richemont.

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Ms Kachanova said of Burberry: “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.”

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

Speculation about a possible takeover comes amid a wave of dealmaking in the City. Low valuations have made even the biggest businesses possible targets, with UAE oil giant Adnoc recently exploring a bid for BP.

Burberry has been one of the worst performers on the FTSE 100 so far this year as demand for luxury goods slows, particularly in China.

Unusually for the industry, it operates as a single brand rather than as part of a larger group. Burberry competes against the likes of LVMH, which owns brands including Louis Vuitton, Stella McCartney and Dior, and is worth £400bn.

Consolidation is already underway in the US, where Tapestry – the owner of Coach handbags and Kate Spade – is currently pursuing a $8.5bn (£6.8bn) deal to buy Capri Holdings, the parent company of Jimmy Choo, Michael Kors, and Versace.

The Federal Trade Commission this week sued to block the deal on competition grounds.



Shares in Kering, which owns Gucci and Balenciaga, tumbled 6.8pc on Wednesday after warning it expects operating income to fall by up to 45pc in the first half of the year.

It follows an 11pc slump in first quarter sales, driven by weakness in China.

Not all luxury brands are struggling: Italy’s Prada, which also owns Miu Miu, reported an 18pc jump in first quarter retail sales, driven by a strong performance in Asia.

Burberry did not respond to requests for comment.