Burberry’s strategic adjustments to its business are paying off with comparable sales rose 90% in the quarter ended June 26 – and almost back to where they were for the same period in 2019.
In the three months to June (Burberry’s fiscal first quarter for FY21/22), the British fashion house generated sales of £479 million ($660 million), close to the £498 million seen two years earlier, before anyone even but had heard of Covid. 19. The company’s stock fell 5.4% late in the afternoon but rose 9.4% year-to-date.
There were strong gains in the Americas, where full-price comparable store sales more than doubled from two years ago, while they grew by more than 55% in mainland China and by about 55% in South Korea. 90%.
The biggest concern for Burberry is Europe, the Middle East, India and Africa (EMEIA), where comparable stores are down 38%, indicating how dependent Europe’s high-end retail industry is on tourism and sales to travelers, particularly from the United States and China.
“Businesses in Europe and much of Asia continue to be hit hard by the significant drop in international tourist traffic,” the company admitted. Extensive and consecutive lockdowns that continued to affect many core markets including the UK didn’t help with domestic visitor numbers either.
Louise Deglise-Favre, associate retail analyst at data and analytics group GlobalData, said: “Burberry has seen a strong recovery in the first quarter, despite an average of 11% of stores closed. While retail sales rose to £479 million, it was 3.8% behind Q1 FY2019/20, significantly lagging the business at competitors LVMH and Dry, which in their latest results showed increases of 11.3% and 2.8% over the pre-Covid period.”
Big shoes to fill
Nevertheless, a recovery is underway based on key solutions, such as eliminating price cuts in both brick-and-mortar stores and online, and reducing reliance on points of sale. Much of the turnaround is thanks to CEO Marco Gobbetti, but his surprising decision to leave take the reins at the end of the year with another brand on the move in transformation mode: Salvatore Ferragamo, is another headache for Burberry as it seeks a successor.
Speaking of Burberry’s latest appearance, Gobbetti said: “Full price sales accelerated as our collections and campaigns attracted new, younger luxury customers. We saw strong growth in our strategic categories, especially leather goods and outerwear, and stopped markdowns in digital and large stores.
“Despite the challenging external environment, we are very pleased with the progress. The company is firmly on track for growth and acceleration and we are confident that we will achieve our medium-term goals.”
A special handbag campaign focused on the new Olympia shape helped convert younger consumers. with Kendall Jenner, singer-songwriter and Forbes 30 Under 30 FKA twigs, and rapper Shygirl, the campaign had a strong response on social media.
More flagship stores are coming
Burberry continues to roll out its new store concept. Since the end of June, the company has opened its first flagship with the new design in Sloane Street, London. The concept “transforms how customers experience our brand and product in a uniquely British luxury setting,” said Burberry.
Seven stores in Asia have introduced the new design, and three more flagships will follow in the next 12 months. By the end of June, most of Burberry’s stores had reopened and only 3% of the estate was still closed, although 35% of the stores still operate with limited hours.
Burberry has also stepped up its social and environmental activities. In June, the company announced plans to become “climate positive” by 2040. To get there, the luxury home is exploring its value chain to accelerate its emissions reduction targets of 46% by 2030 and then net zero by 2040. And to promote diversity and inclusion, Burberry celebrated LGBTQ+ Pride last month by commissioning a special film based on inspiring stories, and making donations to several charities in the industry, including long-standing partner the Albert Kennedy Trust.
In its full-year outlook, Burberry said its outlook was unchanged except for wholesale, which is now expected to grow about 60% in the first half due to a stronger order book. The medium term outlook is for high single digit sales growth and “meaningful” margin improvement.