Burberry posted sales growth of just 1% in its last financial quarter due to the impact of Covid-19 lockdowns in China, while sales were boosted elsewhere by its Lola handbag range and his signature trench coat.
The luxury fashion retailer said sales fell 35% in mainland China due to restrictions and store closures to contain the latest coronavirus outbreak, while sales rose 16% in the rest of the world. during the 13 weeks preceding July 2.
The company recorded the strongest growth in Europe, the Middle East, India and Africa (EMEIA), with sales up 47% year-on-year and expense levels returning above pre-levels the pandemic, with sales to American tourists also rebounding strongly.
The company said sales to Asian tourists, particularly Chinese, remained weak and trade in the UK was not as strong as in Europe after duty-free shopping for non-EU visitors was scrapped in 2020 in the context of Brexit.
Julie Brown, chief operating and finance officer of Burberry, said the majority of sales in Europe were now to locals as the number of Chinese tourists visiting its stores fell by 90%.
“Consumers tend to go to mainland Europe rather than the UK. We would like to see more support to boost the recovery of tourism in the UK,” she said, adding that the ability to claim a VAT refund could be a “key driver for tourism”.
Sales of leather goods, driven by its Lola handbag range, rose 21% outside mainland China, while outerwear, driven by rainwear and jackets, rose 19%.
Burberry warned of uncertainty over the short-term economic outlook and said the company was “actively managing” the impact of soaring inflation, which in the UK hit a 40-year high of 9.1% and heading upwards.
Overall, the company recorded a 1% year-on-year increase in same-store sales to £500m.
Shares fell 5% in early trading on Friday, making Burberry the biggest loser on the FTSE 100.
“In theory, luxury goods retailers should be proof against inflationary and even recessionary environments, with the high-end consumer profile insulated from the economic constraints of many others,” said Richard Hunter, Head of Markets. at Interactive Investor. “However, the closure of storefronts in key regions and the lack of a full Asian tourist return remain headwinds.”
Burberry said it continued to invest and innovate, including launching a campaign for the Lola range featuring models such as Bella Hadid and creating a virtual collection on online gaming platform Roblox.
Other initiatives include a seasonal campaign for its TB Summer Monogram collection, featuring Gisele Bündchen, and the signing of South Korean Premier League footballer Son Heung-min, who plays for Tottenham Hotspur, as an ambassador for the brand. The signing announcement on Instagram fueled record engagement for Burberry, up more than a fifth from the company’s previous most popular post.
“Our performance in the quarter continued to be impacted by lockdowns in mainland China, but I was pleased to see our more localized approach driving recovery in EMEIA, where local customer spending was above levels. before the pandemic,” said Jonathan Akeroyd, chief executive. at Burberry. “Our focus categories, leather goods and outerwear continued to perform well outside of mainland China and our brand activations program drove customer engagement.”
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Post expires at 10:44am on Thursday July 21st, 2022