Burberry benefits from resumption of sales growth in China
Luxury brand Burberry has reported that underlying retail sales rose by 1% to £603 million in its third quarter.
In the three months to 31 December, comparable sales remained unchanged year-on-year which was an improvement on the 4% decline seen in the second quarter.
Burberry’s Asia Pacific region saw a mid single-digit percentage decline in comparable sales. However, excluding Hong Kong and Macau, comparable sales grew by a mid single-digit percentage. Growth resumed in both mainland China and Korea while Japan remained strong with around 50% comparable sales growth.
Burberry said comparable sales in Hong Kong declined by over 20%, driven by a further significant decline in footfall.
Burberry’s EMEIA business achieved mid single-digit comparable sales growth. Driven by the travelling luxury customer, Italy and Spain continued to deliver growth in excess of 20%, while France slowed. Burberry said the UK, which accounts for over one-third of EMEIA's retail revenue, became more challenging, with a slowdown from travelling customers, especially Chinese and Middle Eastern consumers.
Meanwhile, the Americas delivered marginally positive comparable sales growth. Consistent with the first half of the year, Canada, Brazil and Mexico, which account for over 15% of Americas' retail revenue, together delivered double-digit percentage comparable sales growth. The United States experienced some recovery from domestic customers in the third quarter, but a further deterioration from all tourist groups.
Christopher Bailey, chief creative and chief executive of Burberry, said: "In a tougher environment than expected, our sustained focus on growth and cost control drove a number of positive results over the quarter, including the outperformance of digital and a return to growth in mainland China. While Burberry was impacted by the ongoing challenges facing the luxury sector, headwinds in Hong Kong and Macau masked an otherwise stronger performance in many markets.”
Burberry said digital outperformed in all regions during the quarter. Following an investment in mobile, the channel now accounts for the majority of traffic to burberry.com. Growth was also supported by the expansion of the single pool of inventory model into the UK and US, Burberry’s largest digital markets.
During the quarter, Burberry opened two mainline stores and closed one, while opening and closing three concessions.
Burberry currently expects adjusted profit before tax for its full year to be broadly in line with market forecasts, supported by a further reduction in the performance-related pay charge, additional discretionary cost savings and an FX benefit.
Bailey added: “The outlook for our sector remains uncertain as the consumer and environment evolve. However, we are anticipating and responding to these changes through an intense focus on new growth opportunities and the acceleration of our productivity and efficiency agenda."