Burberry lifts annual guidance after strong sales rebound

by | Mar 12, 2021

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Luxury goods brand Burberry on Friday lifted full-year guidance after reporting a “strong rebound” in trading since December.
In an unscheduled trading update, Burberry said fourth quarter comparable retail sales were now expected to be 28% – 32% higher year on year. Group revenue was forecast to fall by 10% – 11% and adjusted operating margin in a range of 15.5% – 16.5%.

Burberry in January pointed to a number of positive signs in the third quarter, including a strong performance in Mainland China and Korea, high online demand, and latest collections being well received.

Sales in the Asia Pacific region rose 11% with strong growth in Mainland China and Korea but sales in Europe, the Middle East and other markets dropped 37% because of store closures and fewer tourists. Sales in the Americas dropped 8% as fewer markdowns more than offset a “mid-teen” rise in full-price purchases.

 
 

The luxury clothing maker was attempting to overhaul its business when the Covid-19 pandemic struck, initially hammering sales in China, its biggest market, and other Asian countries. Chief Executive Marco Gobbetti is revamping collections to appeal to younger customers and reducing Burberry’s reliance on price reductions.

“Since December, we have continued to see a strong rebound and now expect revenue and adjusted operating profit to be ahead of consensus expectations,” the company said in its latest update.

Hargreaves Lansdown analyst Sophie Lund-Yates said the rebound was “testament to the refreshed creative direction taken by the brand.

 
 

“There were concerns the fashion icon’s products would fail to resonate, with the pandemic stopping customers from splurging on big-ticket clothing. The sales gap isn’t as severe as feared though, and is a textbook case of the value of a strong brand,” she said.

“As you’d imagine, Burberry isn’t out of the woods yet. A disruption to tourism spending especially could see the group’s normal revenue patterns disrupted for some time.”

“Disruption isn’t the same as destroying though, so this should be more of a blip than an existential crisis. The share price valuation is some way above the 10-year average, so the market clearly has faith in Burberry’s potential. There’s no denying the view from Burberry HQ just got a little brighter, but there’s still work to be done.”

 
 

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