Burberry sales ‘lacklustre’ despite China boost

Strengthening sales in Mainland China and an “exceptional” UK performance helped UK luxury fashion retailer Burberry weather a weakening US market in its second half year.

Same-store Burberry sales rose 3 per cent – a lesser rate than during the third quarter. The company said a recovering Mainland China market had driven growth in Asia-Pacific.

Incoming CFO Julie Brown says UK Burberry sales soared 90 per cent during the second half year as US tourists took advantage of the weaker pound in the UK.

But sales in its wholesale division fell by 13 per cent and licensing sales fell 38 per cent, although the latter was largely due to the company taking back control of its Japan business.

While based in Great Britain, the bulk of Burberry’s turnover is abroad and Hong Kong and China comprise its largest market.

Releasing its second half year sales figures, the company revised down its estimate of the sales boost from the weaker UK currency from an earlier projected £130 million to £115 million. And it warned shareholders to expect a £10 million hit in 2018.

Charlotte Pearce, associate retail analyst with GlobalData, described the second half results as “lacklustre” following impressive third quarter figures.

“Burberry’s international performance in the second half has proved disappointing, with declining sales in Korea and the US and a challenging market in the Middle East bringing down the brand’s overall performance.

“However, its plan to invest in store refits will help to increase footfall, especially in areas such as Hong Kong, where trading has historically been much more positive.”

She said Burberry’s strong digital performance, particularly via mobile, continues to drive growth for the luxury brand as it maintains its reputation as a digital innovator in the luxury market.

“Burberry live-streamed its February catwalk show on Instagram, giving the brand a sense of accessibility and allowing the brand to engage with shoppers on a platform where many consumers are regularly active. Burberry’s investment in experiential retail, including its app which will be rolled out in English speaking countries from the first quarter, will resonate well with modern shoppers and enable it to promote new products.”

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