Burberry sales showed strength in the first quarter, with comparable store sales up 16 percent outside of Covid-hit China.
In a Nutshell: The British luxury brand maintained its medium-term guidance, despite inflation hampering business and Mainland China still working to overcome Covid lockdowns.
The company reported “encouraging” sales since Mainland China stores reopened in June. However, concerns remain that the coronavirus could drive a new surge in Shanghai, the key commerce city subject to lengthy restrictions.
According to Burberry, growth in the quarter was strongest in the EMEIA region where a focus on localized markets drove sales above their pre-pandemic levels. “This approach, together with increased tourist spend from the Americas has helped to mostly offset lower sales to Asian and especially Chinese tourists,” Burberry said.
It continued to invest in brand and product during the quarter, generating strong engagement on social media, and driving traffic to the Burberry website. The brand adding almost half a million new profiles to its global customer database.
Burberry continued to roll out its new store concept to six more locations, including two doors in Japan, one in Hong Kong S.A.R., China, and three in EMEIA. It remains on track to add 65 new stores in the current fiscal year to the 47 opened last year.
“Our performance in the quarter continued to be impacted by lockdowns in Mainland China but I was pleased to see our more localised approach drive recovery in EMEIA (Europe, Middle East, India and Africa), where spending by local clients was above pre-pandemic levels,” CEO Jonathan Akeroyd said. “Our focus categories, leather goods and outerwear continued to perform well outside of Mainland China and our programme of brand activations boosted customer engagement.”
Net Sales: Burberry said revenue for the quarter ended July 2 rose 5 percent to 505 million pounds ($599.4 million) from 479 million pounds ($568.5 million) in the year-ago period. First quarter comparable store sales rose 1 percent due to Covid-19 lockdowns in Mainland China, although comps were up 16 percent, when excluding Mainland China. Comps were helped by a 47 percent gain in its EMEIA market.
Burberry said that outside of Mainland China, leather goods posted 21 percent comp growth led by new shapes in the Lola handbag range, and outerwear grew 19 percent driven by sales in rainwear and jackets.
The company also said it continues to target “high-single digit revenue growth and 20 percent margins in the medium term,” on a constant exchange rate basis.
“While the current macro-economic environment creates some near-term uncertainty, our performance in Mainland China has been encouraging since our stores reopened in June and we are actively managing the headwind from inflation,” the company said.
Based on the foreign exchange rates as of July 11, Burberry is expecting a currency tail wind of 190 million pounds ($225.5 million) on revenue and 90 million pounds ($106.8 million) in adjusted operating profit for Fiscal Year 2023.
CEO’s Take: “While the current macro-economic environment creates some near-term uncertainty, we are confident we can build on our platform for growth,” Akeroyd said.