Burberry has said its turnaround strategy is working, on the back of growth in North America and China, but spending in Europe has come under pressure amid the conflict in the Middle East.
First Quarter Performance
Boss Joshua Schulman said he was pleased with the luxury fashion brand’s progress over the first quarter, as it pushes ahead with the Burberry Forward turnaround strategy launched in late 2024. The business has refocused on its British heritage and altered its pricing strategy, shifting away from some of its ultra-luxury lines.
The London-listed business reported that retail revenues lifted by 5% to £455 million for the 13 weeks to June 27, compared with a year earlier. Growth was also supported by a 1% increase linked to positive currency exchange rates.
Regional Breakdown
It said the recent positive performance was supported by 12% growth in its Americas business, and a 9% rise in greater China. China had a particular boost from local shoppers and strong demand from Gen Z customers, the brand said. Elsewhere in Asia, the business highlighted an 11% increase in South Korea, linked to both local and tourist spending, but this was partly offset by a 2% decline in Japan.
In Europe, the Middle East and Africa, the group reported a 3% drop in sales, highlighting a drag from the Iran war and weaker tourist spending. The retail business said local trade had boosted sales across its flagship stores in London, as the conflict continued to dent demand from international visitors.
Tax Policy Concerns
Mr Schulman also reiterated pleas from the group for Andy Burnham, who is due to become the new leader of the Labour Party later on Friday, to look at reintroducing a VAT-free scheme for tourists. Rishi Sunak scrapped the scheme in 2021, which Burberry linked to a roughly 50% drop in tourist demand in its stores since before the Covid-19 pandemic.
Product Demand
Burberry said recent sales growth was also supported by strong demand for raincoats, jackets and scarves, with outerwear sales up by double digits.
CEO and Analyst Comments
Mr Schulman, chief executive of Burberry, said: “For the first time in three years, we saw growth across our womenswear, menswear, accessories and childrenswear divisions, anchored by the outperformance of outerwear. Our strategy is working. We are attracting a broad range of luxury customers across product categories, channels and geographies, reinforcing my confidence in the opportunities ahead.”
Adam Vettese, market analyst for Etoro, said: “Burberry shares opened lower this morning after the release of its first quarter trading update, as investors weighed steady but unspectacular progress in the group’s turnaround. The update showed further sequential improvement in comparable store sales, extending the momentum seen in the six months to March. However, the market had hoped for clearer evidence of accelerating momentum or more bullish commentary on the outlook.”
