Burberry says turnaround plan showing early progress despite festive sales dip
In an update to shareholders, the luxury fashion band said the plan launched in November was already starting to pay off.
Luxury fashion brand Burberry has reported a dip in sales over the festive period as it said it was moving with “urgency” to turn the business around and return to profit.
The global fashion house, founded in England in 1856, said the UK was the “under-performer” in terms of its markets around the world.
Burberry launched a ?40 million cost-cutting programme in November after sinking into a loss.
In an update to shareholders on Friday, it said there were early signs that the turnaround plan was already starting to pay off.
It nevertheless reported revenues of ?659 million for the 13 weeks to December 28, down 7% from the ?706 million generated over the same period a year prior.
But this was better than some analysts had been expecting, leading Burberry’s share price to jump by as much as 15% on Friday morning.
Store sales grew in America, boosted by locals and its refurbished New York shop, while sales decreased in Europe, the Middle East and Africa driven by both locals and tourists.
Kate Ferry, Burberry’s finance chief, said the UK market is “reasonably small” in terms of its global sales, but that the region was an “under-performer” with some pressure on spending among shoppers living in the country.
However, the US was strengthening and Asia – a major market for the brand – was “certainly showing signs of recovery”, Ms Ferry said.
Sales nevertheless dropped by nearly a 10th in Asia, with the key Chinese market seeing a 7% decline over the latest quarter.
The region has particularly struggled amid a more stagnant market in the luxury sector over recent years.
Burberry’s signature scarves start from about 420 euros (?355), chief executive Joshua Schulman said on the company’s pricing.
We recognise that it is still very early in our transformation and there remains much to do
He added that the brand had been “running out of bestsellers in many of our stores” for its cashmere capes, which sell from about 2,500 euros (?2,115).
The average selling price of a Burberry product was slightly lower over the latest quarter, Ms Ferry said.
Burberry said it was steaming ahead with its plan to turn around the business, which was launched in November after reporting a ?53 million loss for the first half of its financial year.
It is now expecting its results over the second half of the financial year to “broadly offset” the loss recorded over the first half, “notwithstanding the uncertain macroeconomic environment”.
Mr Schulman said: “We are encouraged by the response to our It’s Always Burberry Weather outerwear campaign and Wrapped in Burberry festive campaign.
“These activations resonated with a broad range of luxury customers, leading to an improvement in brand desirability and strength in outerwear and scarves.”
He said the company believes the strategy will deliver “sustainable, profitable growth over time”, adding: “However, we recognise that it is still very early in our transformation and there remains much to do.”