Burberry sales rise due to strong demand in Asia and Europe

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Models present their creations during the Burberry fashion show at London Fashion Week. Photo: Reuters

Burberry (BRBY.L) said its full-price sales accelerated on a trading update for the third quarter, thanks to consumer purchases of its outerwear and leather goods and strong demand in Asia and Europe. Shares rose nearly 5% as markets opened in London.

Burberry now expects full-year core operating profit to rise 35%. Analysts had expected an average rise of 19% to 472 million pounds ($642 million).

Compared to the previous two years, full-price comparable sales in the third quarter were up 26%, a significant improvement from the 10% achieved in the second quarter of this fiscal, reflecting double-digit growth in the Americas and Asia Pacific, and a less sharp decline in Europe, Middle East, India and Africa.

Retail revenue saw a 5% increase. The leather and outerwear in their products are proving to be particularly popular at the moment, with full-price sales improving by 29% and 38%, respectively, versus pre-pandemic levels.

However, total comparable store sales remained down 3%, as the group continued to reduce discounts.

Share prices soared

Burberry shares rose Wednesday morning. Photo: Yahoo Finance UK

“Full-price sales continued to grow by double-digits from two years ago, accelerating from the previous quarter and reflecting high-quality business,” said President Jerry Morby.

“Outdoor apparel and leather goods among our focus categories were strong as we continued to attract new and younger consumers to the brand. Despite the ongoing challenges of the outdoor environment, we are confident to finish the year strong and provide an excellent platform on which to build when our new CEO Jonathan joins Akeroid in April.

The company had announced in October that Ackeroyd, president of high-end fashion rival Versace, would become the new CEO and CEO. He will replace Marco Gobetti, who previously said he would step down at the end of 2021 and head to Italy to manage the luxury Salvatore Ferragamo group.

“The imminent arrival of a new CEO has upset some based on the loss of momentum built up by the previous incumbent,” said Richard Hunter, Head of Markets at Interactive Investor. Regional lockdowns in parts of China and the country’s volatile economic recovery are also weighing on the outlook, while the near-total lack of tourism in many of its regions presents inevitable revenue headwinds.

Read more: UK inflation hits 30-year high as cost of living pressures loom

But he believes that “changing Burberry’s approach improves its fortunes” – the decision to move away from franchises and passive partners to focus on full-price sales is a decision that not only underscores Burberry’s position as a high-end luxury brand, but also has a tangible impact on revenue, margins and profits.

He added that the lack of tourists is still puncturing revenue.

Sophie Lund-Yates, Equities Division, said: “Tourism accounted for a whopping 40% of revenue in EMAI prior to the coronavirus outbreak, which means that until the skies fill up with travelers again, performance will decline.” Analyst at Hargreaves Lansdown.

She added that Burberry is in a better position than some had feared because “luxury customers are not affected by economic ups and downs, including when money in the bank loses value at a faster than usual rate.”

Burberry shares have only managed a 1% gain over the past year, compared to a roughly 13% lift for the broader FTSE100 index.

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