Burberry sales tumble as UK label warns of challenging times
Burberry Group Plc warned of a challenging first half after the British maker of pricey trench coats reported tumbling sales on weak demand in China and the US
Comparable store sales in the quarter ended in March fell 12 per cent from a year earlier, Burberry said Wednesday. The luxury house also forecast a decline of about 25 per cent in wholesale revenue in the first half of its fiscal year, which began last month.
The label has been pursuing a turnaround that’s failed to bear fruit as demand cooled for high-end goods. Creative director Daniel Lee has hearkened back to Burberry’s British roots by highlighting the label’s famous check pattern in products such as its rocking horse bags, which can sell for £1,890 (€2,200) in London. The brand has also been focusing on its outerwear. But some analysts have said Burberry’s price points were too high for the targeted customers.
“Burberry is finding it tough to execute its brand development plan against a backdrop of moderating consumer demand,” Luca Solca, an analyst at Bernstein, wrote in a note on Wednesday.
The shares fell as much as 4.6 per cent in London trading, and have more than halved in the past 12 months.
The Asia-Pacific and Americas regions performed poorly for Burberry last quarter, with sales in China falling 19 per cent. The trends at the end of March were similar to the rest of the quarter, Burberry CEO Jonathan Akeroyd told reporters on a call, pointing to “very quiet” traffic in malls in China.
Burberry joins Gucci owner Kering SA in suffering from a challenging environment for brands that are positioned in the middle of the luxury market. The French group warned last month that recurring operating income in the first half would drop by as much as 45 per cent.
Rivals such as LVMH Moët Hennessy Louis Vuitton SE and Hermes International SCA have shown better resilience to the slowdown that followed the post-pandemic demand rebound. That’s as many wealthy shoppers sought out the most exclusive brands.
Speaking about product development, Akeroyd said Burberry could do more to leverage its brand heritage to boost its offering for male tailoring. The label currently sells menswear that’s skewed toward a younger and fashion-driven customer base, rather than professional workers.
“There are areas where we’re learning as we’re progressing,” Akeroyd said about the company’s menswear. “That timelessness that we have is definitely an opportunity for us.”
Burberry has seen a wider slowdown in the US that goes beyond so-called aspirational customers, who have cut back spending as pandemic-related savings dried up and inflation took hold. The brand has also seen London, where many of its recently renovated stores are located, lose sales to Paris or Milan, which offer VAT-free shopping — an incentive Britain dropped three years ago.
