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Burberry profit falls 75% but handbags help drive recovery

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Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·2-min read
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A Burberry bag. Photo: Christian Vierig/Getty Images
A Burberry bag. Photo: Christian Vierig/Getty Images

The COVID-19 pandemic significantly hurt sales at British luxury brand Burberry (BRBY.L) but a recovery is already underway thanks to a revival in Asia and the Americas.

Burberry published its interim results on Thursday, showing sale fell by 30% to £878m (£1.1bn) in the six months to the end of September. Operating profit fell 75% to £51m.

COVID-19 forced Burberry to close the majority of its stores around the world in March. 10% of the brand’s shops remain closed across Europe, the Middle East, and Africa.

However, the company said a recovery was already underway thanks to growth elsewhere. Sales in America grew by 21% in the three months to September and grew by 10% in China.

“While the virus continues to impact sales in EMEIA, Japan and South Asia Pacific, we are encouraged by our overall recovery and the strong response to our brand and product, particularly among new and younger customers,” chief executive Marco Gobbetti said in a statement.

READ MORE: UK economy rebounded by 15.5% prior to COVID-19 second wave

Digital sales have grown by double digit percentages, Burberry said, helped by online “pop-up shops” and a partnership with Chinese internet giant Tencent in Shenzhen.

Leather goods such as handbags have been selling particularly well. The company highlighted strong demand in China for its “Pocket” handbag. Prices start at £890.

Burberry said the outlook remained “uncertain” but said it was “well positioned to continue to drive performance and deliver growth in the medium term.”

Burberry shares rose in early trade. Photo: Yahoo Finance UK
Burberry shares rose in early trade. Photo: Yahoo Finance UK

The brand plans to cutback on discounting, which will hit revenues in the short-term but should help to increase brand value over the longer term.

“In an environment which remains uncertain, we will continue to deliver exceptional product, localise plans and shift resources, while leveraging the strength of our digital platform to inspire customers,” Gobbetti said.

Shares rose 4% in early trade.

WATCH: Burberry holds its first ever virtual fashion show