Turnaround lifts sales at British luxury brand Burberry
London — British luxury brand Burberry reported quarterly sales growth of 3% ahead of the first collection in September from the group’s new designer that should help energise its turnaround.
Burberry CE Marco Gobbetti is part way through repositioning the label to be more upmarket and is pinning his hopes on Riccardo Tisci, the former Givenchy star who has designed costumes for Beyonce and Madonna, to help transform the British fashion house.
Gobbetti has warned there will be little growth in revenue and operating profit while the plan is being implemented.
Shares in Burberry traded down 3.5% to £20.27 by midmorning after the quarterly sales result met expectations. The stock has climbed 17% since the beginning of 2018, outperforming a flat FTSE 100 index.
"In early trade, the bears seem to be in charge, with the stock slipping around 4% as profit-taking sets in following Burberry’s strong run in recent weeks," said Steve Clayton from Hargreaves Lansdown, whose fund owns Burberry shares.
We do find our Chinese clientele will move depending on currency and how currency is moving, and basically we had far fewer Chinese tourists in Europe, in the UK and continental Europe this quarter. They were shopping more in Asia
Analysts at RBC, who rate Burberry "underperform", highlighted the risks around the group’s new direction.
"We remain cautious on the stock given the potential disruption with the change in creative direction next year and the cost/time/risks to reposition a big brand like Burberry into luxury fashion," RBC’s Rogerio Fujimori said.
Burberry said on Wednesday there was no change to its earnings guidance at constant exchange rates after its underlying performance in the 13 weeks to June 30.
Its sales were driven by a strong performance in the Americas and continued demand from Chinese buyers for its heritage trench coats, rainwear, handbags and other products, but demand from Chinese tourists had shifted to Asia and away from the UK and Europe due to the exchange rates, it said.
"We do find our Chinese clientele will move depending on currency and how currency is moving, and basically we had far fewer Chinese tourists in Europe, in the UK and continental Europe this quarter. They were shopping more in Asia," chief financial officer Julie Brown said.