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Burberry sales rise on robust demand in Asia and Europe

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·3-min read
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Models present creations during the Burberry catwalk show at London Fashion Week in London. Photo: Reuters
Models present creations during the Burberry catwalk show at London Fashion Week in London. Photo: Reuters

Burberry (BRBY.L) said its full-price sales accelerated in its third quarter trading update, thanks to consumers buying its outerwear and leather goods and strong demand in Asia and Europe. Shares were up roughly 5% as markets opened in London.

Burberry now expects full year underlying operating profit to rise 35%. Analysts had expected on average a rise of 19% to £472m ($642m).

Compared to two years ago, third quarter full price comparable sales rose 26%, a considerable improvement from the 10% achieved in the second quarter of this financial year, reflecting double digit growth in the Americas and Asia Pacific, and less severe declines in Europe, Middle East, India and Africa.

Retail revenues saw an increase of 5%. Within its products, leather and outerwear are proving especially popular at the current time, with improved full-price sales of 29% and 38% respectively versus pre-pandemic levels.

Total comparable store sales were still down 3% though, as the group continued to reduce markdown.

Burberry's shares were up on Wednesday morning. Photo: Yahoo Finance UK
Burberry's shares were up on Wednesday morning. Photo: Yahoo Finance UK

“Full-price sales continued to grow at a double-digit percentage compared with two years ago, accelerating from the previous quarter and reflecting a higher quality business,” said chair Gerry Murhpy.

“Our focus categories outerwear and leather goods performed strongly as we continued to attract new, younger consumers to the brand. Despite the ongoing challenges of the external environment, we are confident of finishing the year strongly and providing an excellent platform on which to build when our new CEO Jonathan Akeroyd joins in April.”

The compnay had announced in October that Akeroyd, boss of rival high-end fashion label Versace, will become its new CEO and executive director. He will replace Marco Gobbetti, who had said earlier he will step down from the role at the end of 2021 and head to Italy to run luxury group Salvatore Ferragamo.

Richard Hunter, head of Markets at interactive investor, said: "The imminent arrival of a new CEO has unsettled some on the basis of a loss of momentum built up by the previous incumbent." Regional lockdowns in parts of China and a chequered economic recovery in the country are also dragging on prospects, while the almost complete lack of tourism across many of its regions is an unavoidable headwind to revenues.

Read more: UK inflation hits 30-year high as cost of living squeeze looms

But he believes “Burberry’s change of tack is improving its fortunes" — the decision to move away from concessions and non-luxury partners to focus on full-price sales is one which not only underlines Burberry’s status as a high-end luxury brand, but is also having a meaningful impact on revenues, margins and profit.

He added that a lack of tourists is still punching a hole through revenues.

“Tourism made up a huge 40% of revenue in the Europe, Middle East, India and Africa region before COVID, which means until the skies are full of packed travellers again, performance will be held back,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.

She added that Burberry is in a better position than some had feared as “luxury customers tend not to be as swayed by economic ups and downs, including when money in the bank is losing its value at a faster rate than normal.”

Burberry’s shares have managed a gain of just 1% over the last year, as compared to a hike of almost 13% for the wider FTSE100.

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