Burberry’s sales in China surge as lockdown restrictions are eased


Luxury fashion chain Burberry saw sales drop 9 per cent in its third quarter covering the Christmas period.

Amid sporadic ongoing lockdown restrictions, the group’s trading across Britain, the rest of Europe and key hubs like the Middle East, suffered throughout the period, with sales down around 37 per cent.

But, the chain fared better in China and Korea, and the Asia Pacific region saw sales climb 11 per cent as lockdown restrictions in these areas were eased.

Luxury fashion chain Burberry saw sales drop 9 per cent in its third quarter

Burberry, which has around 15 per cent of its stores closed at present, said it had started to see an increase in the number of new and younger buyers at its stores, but vowed to keep appealing to its loyal existing customer base.

Football player Marcus Rashford joined Burberry’s festive sales campaign, which proved to be a hit with shoppers.

The chain said: ‘The consumer response to the campaign was exceptional, with engagement on our Instagram campaign posts more than double our Q2 average, and imagery featuring Marcus becoming our most liked Instagram post of all time.’

Sales in leather goods and ‘outerwear’ like coats rose over the period, and total digital sales swelled by a hefty 50 per cent. The group said online sales in China increased to the tune of ‘triple digits.’

Chief executive Marco Gobbetti said: ‘Despite the challenging external environment, we made good progress on our strategic priorities in the quarter.

‘We saw a strong increase in full-price sales as our collections and communication resonated well with new, younger clientele as well as existing customers.

‘Our localised plans and digital capabilities helped drive growth in rebounding markets and we implemented our planned reduction in markdown.

‘While the short-term outlook remains uncertain due to COVID-19, we are well placed to accelerate when the pandemic eases.’

On Brexit, Burberry said it expected to see a ‘modest’ rise in border trade compliance costs, ‘as well as some incremental duty under the rules of origin.’

Sales: Burberry’s sales in China rose sharply in its third quarter, new results show

The VAT retail export scheme previously allowing VAT refunds for non-EU tourists has now been stopped. Burberry thinks this change could start having a ‘more significant impact’ on its performance once lockdown restrictions are lifted and tourists start returning to Europe in larger numbers.

Shares in FTSE 100-listed Burberry are up 1.53 per cent to 1,764p this afternoon. A year ago the share price was 2,277p.

AJ Bell’s Russ Mould commented: ‘Burberry’s latest update shows how dependent it is on the tourist trade. It needs wealthy people to be travelling to different countries and shopping as part of their itinerary. Its stores are often key destinations and picking up some of its chequered products has become second nature for many wealthier individuals.

‘Travel restrictions imposed as part of lockdown measures in various parts of the world are hurting its sales, particularly in the broader EMEIA region which covers Europe, the Middle East, India and Africa.

‘Unfortunately turning the travel taps back on won’t be an instant solution for one of its key regions. The end of VAT refunds for non-EU tourists is going to have a negative impact on UK sales and so Burberry needs to find a way of making its UK stores and product pricing more attractive.

‘Against these challenges, there are plenty of reasons for Burberry to be looking smart. It is seeing decent growth in full priced items and is picking up a new generation of customers with younger clientele helping to drive sales as well as repeat business from existing customers,’ Mould continued.

‘Online sales growth is also very impressive, particularly in mainland China. Furthermore, it has struck gold with signing up footballer Marcus Rashford to a recent marketing campaign. He is seen as a hero to people across the UK for his role in fighting child food poverty. Naturally his association with the brand will have placed Burberry in a favourable light with a lot of people.’