Burberry, the renowned British luxury fashion brand, recently released a trading update with figures that raise concern. The company reported a decrease in retail revenue, dropping from £756 million to £706 million in the 13-week period leading up to December 30. Although this represents a 7% decrease, Burberry emphasized that, when considering constant exchange rates, the fall was only 2%. Additionally, while comparable store sales were down 4%, the opening of new stores contributed positively, adding 2%.
A major issue during this quarter was the significant decline in sales in the Americas, where comparable store sales plummeted by 15%. The EMEIA region also experienced a decrease in sales, though comparatively lesser, at 5%. The only region that saw growth was Asia Pacific, with a 3% increase. This was driven by an 8% rise in Mainland China, a 9% increase in Japan, and a 2% uplift in South Asia Pacific. However, South Korea witnessed a 10% decline in sales.
Despite the challenges faced by Burberry, CEO Jonathan Akeroyd remains optimistic about the company’s future. However, the company withdrew its profit guidance and adjusted its full-year results expectations downwards. Akeroyd stated that Burberry was in the early stages of executing its transition to a new modern British luxury creative expression, which had become more challenging due to the slowing demand for luxury goods. The company experienced a further deceleration in its key December trading period, resulting in the revision of its full-year results forecast. Nevertheless, Akeroyd remains confident in Burberry’s strategy and its ambition to achieve £4 billion in revenue.
The profit downgrade is significant, with adjusted operating profit for the financial year now expected to range between £410 million and £460 million. The company also highlights that exchange rates will continue to pose a challenge, with a currency headwind of approximately £120 million affecting revenue and a decrease of around £60 million in adjusted operating profit. In November, Burberry had already indicated that annual adjusted operating profit could be at the lower end of the consensus range of £552 million to £668 million, and the new forecast falls well below that range.
Overall, Burberry’s trading update emphasizes the ongoing difficulties faced by the company, particularly in the Americas and EMEIA regions. Slowing luxury demand and unfavorable exchange rates continue to pose challenges to Burberry’s performance. However, the company remains committed to its strategic vision and is working towards realizing its full potential in the luxury fashion market.
Useful links:
1. Burberry’s Q3 Trading Update
2. BBC Article on Burberry’s Trading Update
