Burberry, the luxury fashion brand, has released its Q1 trading update, which revealed a mixed performance. While the company expressed satisfaction with the recovery in the Europe, Middle East, India, and Africa (EMEIA) region, thanks to increased spending by local customers surpassing pre-pandemic levels, it also faced challenges due to lockdowns in Mainland China, a crucial market for Burberry. Despite this, the company’s focus categories, such as leather goods and outerwear, performed well outside of Mainland China, and its brand activation initiatives helped to boost customer engagement.
In terms of figures, Q1 retail revenue increased by 5% to £505 million, but remained flat on a currency-neutral basis. Comparable store sales only grew by 1%, but excluding Mainland China, the growth was as high as 16%, with an impressive 47% increase in EMEIA comp store sales. Notably, leather goods and outerwear saw double-digit comparable growth outside of Mainland China, with the Lola handbag range performing exceptionally well.
Taking a closer look at the positive news from the EMEIA region, Burberry highlighted that clients in their home markets increased spending to levels surpassing pre-pandemic figures. The company’s localized approach, coupled with increased tourist spend from the Americas, helped offset lower sales to Asian and Chinese tourists. In Mainland China, sales declined by 35% due to Covid restrictions, while the Asia Pacific region experienced a 16% decline. Initially, around 40% of Burberry’s distribution was disrupted by Mainland China’s lockdowns, including its digital hub. Although disruptions continued for the first two months, all stores were reopened by the end of the quarter. The decline in Mainland China was partially offset by strong performances in the recovering markets of Japan and South Asia Pacific.
Meanwhile, the Americas saw a 4% decrease in sales, facing challenging comparisons. However, outerwear and bag sales performed well in the region. Globally, Burberry’s marketing efforts paid off, with the expanded Lola range and high engagement on social media driving increased website traffic and adding almost half a million new profiles to its global customer database. The company also focused on enhancing the customer experience in stores, implementing its new design concept in six additional locations during the quarter.
Despite near-term uncertainties presented by the current macroeconomic environment, Burberry remains on track to achieve its goal of opening 65 newly designed stores by FY23, in addition to the 47 stores rolled out last year. The company is confident in its ability to build on its growth platform.
Useful links:
1. Burberry Official Website
2. Financial Times: Burberry Group
