With Versace selling for £1bn, what does this tell us about the valuations of the FTSE 100’s ‘fashionable’ stocks?
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, itâs 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 âcreated a challenging retail environmentâ.
Against this backdrop, Burberryâs share price is now (8 December) less than half what it was in the spring of 2023.
However, despite the industryâs woes, Prada paid â¬1.25bn (£1.09bn) for Versace. This is generous for a loss-making company, particularly one thatâs 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), Versaceâs EBITDA was negative, which isnât very helpful when it comes to valuing others in the sector. On the face of it, Pradaâs 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 Versaceâs.
| 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 Burberryâs 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 itâs one for patient investors to consider.
The FTSE 100 also includes two other fashion stocks. Iâm 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. Iâd 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 Fashionâs (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 itâs highly cash generative. And it retains a strong brand. This helps it maintain a peer-leading gross profit margin. Next yearâs Fifa World Cup should also give it a bit of a boost. On balance, I think itâs worth considering.
The post With Versace selling for £1bn, what does this tell us about the valuations of the FTSE 100’s ‘fashionable’ stocks? appeared first on The Motley Fool UK.
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James Beard has positions in Burberry Group Plc and JD Sports Fashion. The Motley Fool UK has recommended Associated British Foods Plc, Burberry Group Plc, and Nike. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
