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Burberry’s boosted sales dragged down by Covid lockdowns in China

Years of frequent lockdown restrictions across China have weighed on sales for luxury fashion brand Burberry, despite enjoying a boost in shoppers in Europe, the Middle East and Africa.

Mainland China, which is the biggest market for Burberry, only began significantly easing its Covid-related restrictions at the end of last year.

The British luxury brand saw its store sales increase by just 1% in the last three months, compared to the equivalent period in 2021.

In China alone, sales declined by nearly a quarter as shoppers faced ongoing restrictions under the nation’s strict zero-Covid policy.

However, if China is excluded from the total, then Burberry would have seen sales jump by more than a tenth, it said.

This is driven by a particularly strong performance in Europe, the Middle East and Africa, where store sales grew by 19% over the quarter, compared to the year before.

Accessories like bags, scarves and belts, performed well and leather products enjoyed double-digit sales growth, Burberry said.

And outside mainland China, sales of outerwear, including the brand’s iconic trench coat, grew by high-single digits.

The historic brand, which was born in England in 1856,  steamed ahead with innovative marketing campaigns last year to advertise its outerwear clothing line, launching more than 50 pop-ups, VIP experiences, influencer campaigns and even a collection in partnership with video game Minecraft.

Its Christmas campaign featured singers Shakira and Burna Boy, with Instagram posts featuring Shakira becoming some of its most engaging posts to-date, Burberry said.

Burberry Show – London Fashion Week February 2020
A model on the catwalk during the Burberry show at London Fashion Week February 2020, held at Olympia National, London (PA)

Richard Hunter, head of markets at Interactive Investor, said: “Despite an awkward economic backdrop, Burberry has ploughed on with the innovative campaigns which are making the brand increasingly relevant to a new generation of customers.

“In some ways, the higher end nature of the group’s products are aimed at customers who, to a large extent, are largely shielded from inflationary or even recessionary concerns.

“The relaxation of the zero tolerance Covid-19 policy in China has yet to wash through to the numbers, and this could be an area in which Burberry gains significant advantage.

“Traditionally the group has reaped the benefit of Asian tourism spending, and the possibility of pent-up demand from locked-down consumers could well lead to a coiled spring effect which would complement the progress being made elsewhere.”

The company has had a big shake-up of its senior leadership team over the past year.

Jonathan Akeroyd joined the company as chief executive officer in April, stepping over from Milan-based luxury brand Gianni Versace.

Meanwhile, Julie Brown will be leaving in April this year from her well-respected role of chief financial and operating officer. And its creative director of nearly five years, Riccardo Tisci, stepped down last year and was replaced by Daniel Lee.

Mr Lee’s debut collection is set to be unveiled at next week’s London Fashion Week.

Mr Akeroyd said: “Overall, we are pleased with our performance in the third quarter as double-digit revenue growth outside of mainland China offset the impact of Covid-related disruption there.

“Europe, in particular, continued to perform well, driven by strong trading over the festive period, and leather goods delivered another quarter of double-digit growth globally.

“We remain confident in our ability to reach our medium-term targets, despite the current macro-economic environment.”

Shares in FTSE-100 listed Burberry were up by more than 2.5% on Wednesday morning.