British luxury brand Burberry said quarterly comparable store sales rose 11 per cent, a jump on its prior quarter and beating market forecasts, boosted by increased tourist spending in Europe and the easing of Covid-19 restrictions in China.
The second-quarter performance lifted first-half revenue to £1.35 billion (€1.61 billion), up 5 per cent in constant exchange rates and just ahead of forecasts, while adjusted operating profit rose 6 per cent to £238 million.
Chief executive Jonathan Akeroyd presented his plan to drive growth alongside the results, including a target to broadly double sales of leather goods, which currently account for 36 per cent of Burberry’s total, shoes and women’s ready to wear, and grow outerwear by about 50 per cent in the medium term.
Under the creative direction of its new designer Daniel Lee, Burberry would “refocus on Britishness”, it said.
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“Our focus in this next phase is on growth and acceleration,” Mr Akeroyd said, adding that the brand’s long-term ambition was to achieve sales of £5 billion.
Known for its camel, red-and-black check and trench coats, Burberry kept near-term guidance to the end of its 2024 financial year of high single-digit revenue growth and a margin of about 20 per cent.
Finance director Julie Brown said the company aimed to increase sales to £4 billion in the medium term – three to five years – while broadly retaining its margin target.
She said comparable store sales in mainland China, Burberry’s biggest single market, fell 1 per cent in the second quarter after falling 35 per cent in the first, despite some local Covid lockdowns in September.
“In the first quarter we had some of the major cities locked down – Shanghai and Beijing – which impacted trading,” she told reporters. “In the second quarter the situation eased considerably.”
Europe performed strongly, with sales up 25 per cent in the second quarter, boosted by a rise in tourists from the United States, the Middle East and locations in Asia outside mainland China.
Overseas visitors in destinations such as Paris, London and Milan accounted for 40 per cent of business. Prior to the pandemic, that figure stood at about 60 per cent.
“The big tourists going into EMEIA are essentially Americans and also the Middle Eastern nationalities.”
The Chinese tourist was still absent, however, with about 97 per cent of spending by Chinese customers happening in China.
The Americas continued to be a weak spot, with quarterly sales down 3 per cent due to weaker demand for entry-level items as well as US customers spending in Europe rather than at home. – Reuters
(c) Copyright Thomson Reuters 2022
