Burberry Forecasts Lower Full-Year Sales|Sales Hit by Slumping Demand for Luxury Goods

On November 16, Burberry indicated that it may have difficulty meeting its full-year sales guidance due to weak global demand for luxury goods. Adjusted operating income is expected to be at the low end of the current consensus range of 552 million pounds to 668 million pounds. This sent the company’s share price down nearly 10% in early trading.

Burberry’s second-quarter same-store sales were up just 1%, while first-half retail same-store sales were up 10% on Thursday.

“While the macroeconomic environment has become more challenging recently, we are confident in our strategy to realise our potential as the modern British luxury brand, and we remain committed to achieving our medium and long-term targets,” said Jonathan Akeroyd, Burberry’s CEO in a statement.

According to the company, sales in the Asia Pacific region grew 18% in the half year, slowing to 2% in the second quarter. The overall growth rate was particularly affected by lower sales in China and South Korea, where same-store sales in mainland China increased 15% for the half year but declined 8% in the second quarter. In South Korea, sales were down 1% for the half year and 7% in the second quarter.

Meanwhile, in Japan, comparable store sales increased 43% in the first half year and 41% in the second quarter, driven by tourists. In South Asia Pacific, comparable store sales were up 30% in the first half year and 22% in the second quarter. EMEIA comparable store sales increased 14% in the first half of the year and 10% in the second quarter, driven by a 39% increase in tourists in the first half of the year.

Continental Europe outperformed the regional average for the half year while the United Kingdom continued to lag. America experienced a 9% decline in the first half of the year and a 10% decline in the second quarter.

Burberry’s First Half Year in Review

Burberry has welcomed Daniel Lee as its new creative director for the fall/winter 2023 season and has renewed its brand image and product lineup.

While it is too early to comment in detail on commercial performance, Akeroyd said, “We continued to build momentum around our new creative vision with the launch of our Winter 23 collection in September, the first designed by Daniel Lee.” He added that consumer response to the brand’s newly revitalized image has been positive.

Comparable store sales of outerwear, including the brand’s signature trench coat, were up 21% in the first half of the year and 10% in the second quarter. As expected, heritage rainwear in the iconic Burberry check was the mainstay of sales for both men and women. Comparable store sales of leather goods increased 8% in the first half year and 3% in the second quarter, driven by icons such as the Vintage Check and new shapes introduced for Winter 23 such as the Knight bag and Trench tote gaining traction, gaining popularity. In prêt-à-porter, men’s sales were up 6% and women’s sales were up 7% in the first half of the year.

The company also continues to invest in distribution, opening or renovating 33 stores during the first half of the year, including New Bond Street in London, Rodeo Drive in Los Angeles, and Omotesando in Tokyo. The company plans to complete more than 50% of its network by the end of this fiscal year.

The luxury industry is facing declining demand from luxury buyers after the post-pandemic boom. Even luxury giant conglomerates LVMH, Kering, and Richemont have seen a sharp slowdown in growth rates in recent quarters.

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