Burberry (BRBY.L) said Manchester United (MANU) and England national football player Marcus Rashford was key to its “highly successful" Instagram campaign, even as retail revenue took a hit due to the coronavirus pandemic. The company’s shares were up around 5% on Wednesday morning.
The iconic British fashion giant said in November it launched its “festive” campaign on Instagram with Rashford, to which the response by consumers was “exceptional.”
“Engagement on our Instagram campaign posts were more than double our Q2 average, and imagery featuring Marcus becoming our most liked Instagram post of all time,” it said.
“Marcus' work to support the UK's youth sits at the heart of our partnership and embodies our commitment to community and going beyond,” it added.
Burberry said it continued to use its digital capabilities to link customers to its stores in periods of limited traffic or lockdowns, including through a new live chat functionality on its website, virtual appointments and virtual client events. It added that “In the COVID-19 context, digital remains a key driver of growth for the business.”
However, its retail revenue fell 5% to £688m ($940.8m) in the third quarter. Retail comparable store sales declined 9% as planned reductions in markdown and reduced tourist traffic in outlets offset high single-digit full-price sales growth, the company said.
In EMEIA (Europe, the Middle East, India, and Africa), comparable store sales were down 37% due to fewer tourists and store closures
But in the Asia Pacific region they were up 11%, with strong growth in China and Korea.
CEO Marco Gobbetti noted that in the third quarter, “our localised plans and digital capabilities helped drive growth in rebounding markets and we implemented our planned reduction in markdown.”
“While the short-term outlook remains uncertain due to COVID-19, we are well placed to accelerate when the pandemic eases,” he said.
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Sophie Lund-Yates, equity analyst at financial services company Hargreaves Lansdown, said: “Burberry is steaming ahead with its planned reduction in markdowns. This won’t only help margins in the long run, but is an integral part of elevating the brand. That’s a key element of Burberry’s strategic shift to locate itself further up the luxury chain.”
Looking forward, Burberry said that “given the spread of the more transmissible new variants of COVID-19…we expect trading will remain susceptible to regional disruptions as we close the financial year.”
In terms of Brexit, it said it is “working through the full implications of the deal and mitigation of short term disruption and structural costs.”
Based on preliminary analysis, it expects a modest increase in border trade compliance costs as well as some incremental duty.
The scheme previously allowing VAT refunds for non-EU tourists has now been stopped.
“This development, which will reduce the attractiveness of the UK as a destination for luxury shopping, will have limited impact on revenue in the current year given the low levels of tourist traffic, but is expected to have a more significant impact when travel flows resume with sales likely to shift between countries,” Burberry said.
Lund-Yates echoed this, stating the scrapping of the scheme “will disrupt Burberry’s established revenue patterns.”
“Burberry will be busy trying to cook up ways to stem any potential sales outflow for when travel normalises. Achieving that looks a likely outcome, with new ranges resonating well, suggesting the group’s artistic direction has the ability to stand in good stead,” she said.
“Store closures and Brexit headwinds mean the short term picture is rather messy for Burberry. But zoom out and the bigger picture is smoothing itself out, as the strategic turnaround continues to gather pace despite all the difficulties,” she added.
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