Burberry Sees Turnaround Signs Amidst Global Sales Growth
The British luxury brand reported a 5% rise in comparable sales for the first quarter, driven by strong performance in China and the Americas, but noted continued headwinds in Europe due to geopolitical conflict.
Burberry has announced encouraging signs of a turnaround, with its chief executive Joshua Schulman stating that the company's recovery strategy is yielding positive results. For the first time in three years, all divisions—Womenswear, Menswear, Accessories, and Childrenswear—recorded growth, with Outerwear being a particular standout.
Comparable sales increased by 5% to £455 million in the 13 weeks ending June 27. This growth was significantly boosted by a 9% rise in sales in China, attributed to attracting new Gen Z customers, and a robust 12% increase in sales across the Americas. These gains were bolstered by a marketing campaign launched in March for the brand's 170th anniversary, titled ‘The Trench Portraits of an Icon,’ which featured celebrities such as Eberechi Eze, Jonathan Bailey, and Kate Moss.
Following the campaign, Burberry observed a 19% increase in new customers for its rainwear products. The brand also continued to experience strong demand for its scarves and signature outerwear, including trench coats. Sales of women's handbags also returned to growth.
However, the company's division covering Europe, the Middle East, and Africa experienced a 3% decline in sales. This downturn is attributed to the ongoing conflict in the Middle East and its impact on tourist spending in Europe. The disruption has affected tourism in major European shopping destinations like Paris and reduced footfall in luxury retail hubs such as Dubai.
Burberry acknowledged the influence of the conflict and the broader macroeconomic environment on consumer confidence in its outlook for the remainder of the year. In early trading following the announcement, Burberry shares fell by 3.96% to 1,076p.
Richard Hunter, head of markets at Interactive Investor, commented that the share dip suggests some investors remain unconvinced about the turnaround. However, he added that if the current momentum continues, it could exert upward pressure on the market consensus, which currently stands at a 'hold.'
Earlier in the week, Schulman, who has been tasked with restoring Burberry's reputation for 'timeless British luxury,' faced shareholder pressure. At the company's annual general meeting, 35% of shareholders voted against a £12.2 million bonus for Schulman, indicating investor scrutiny over executive compensation during the recovery phase.