Luxury fashion retailer blames sales problems on coronavirus restrictions in the Asia-Pacific region. Burberry reported a slowing in sales growth during its most recent financial quarter. This was due to the continued impact of Covid-19 restrictions, even though sales were just above pre-pandemic levels.
According to the luxury fashion retailer, total revenues for 26 weeks to 25 September reached PS1.2bn. This is 38% more than last year. The second half of the period saw a 6% increase in sales at like-for-like stores. The shares fell by 5% on Thursday, making it one the largest fallers in the FTSE 100.
For the company’s sales problems, the blame was on the Covid-19 restrictions in Asia-Pacific. The company stated that restrictions in China, a major market for luxury goods was “especially impactful […] reducing feetfall materially, which led to an adverse effect upon revenues”. It added, however, that September saw a “good recovery”.
The latest quarter saw a 25% drop in in-store sales in Europe and the Middle East, India, Africa, and India. Zuzanna Pusz, an investment bank at UBS, stated that Burberry’s sales growth is “very weak” when compared to peers.
Richard Hunter, Interactive Investor’s head of markets, stated that the drop in share prices was due to the “weakening” of sales in the second quarter. However, the overall numbers for the first half are still positive. It also experienced “generally high expectations”.
Burberry is in the process of switching management, after it poached the head of Versace, Jonathan Akeroyd, to take over as chief executive from Marco Gobbetti, who was part way through a turnaround plan aimed at taking Burberry further upmarket, with prices to rival its French and Italian rivals. Gobbetti will step down at the end of the year, after saying he wanted to return home to Italy.
The British brand, best known for its signature check and trench coats, has increased its market share. This has resulted in a reduction of discounts. Instead of focusing on the growth of products that are sold at full price, the company is concentrating on the sale of more products.
Burberry chair Gerry Murphy said that the company had made “strong progress in half”. Murphy will be the company’s chair from January to Akeroyd begins in April. He highlighted “double-digit percentile” growth in full price sales which he claimed was generating higher profit margins on products.
He said, “We are witnessing an acceleration of performance in countries less affected by travel restrictions, and we remain confident in achieving our medium term goals.”
Burberry also reinstated the dividend and relaunched a share-buyback program.