Burberry Q1 sales return to pre-Covid levels driven by younger shoppers
By Frank Prenesti
Date: Friday 16 Jul 2021
(Sharecast News) - Luxury goods maker Burberry reported a return to pre-pandemic sales as younger customers helped drive a sharp rise in first quarter revenues.
The company on Friday said revenue increased 98% year on year to £479m in the 13 weeks to June 26 on a constant currency basis with leather goods, jackets and shoes proving particularly popular.
Comparable store sales rebounded strongly, rising 90% year on year and 1% against 2019 before the Covid-19 pandemic struck and led to closures of non-essential shops. Full-price sales growth accelerated 26% compared with 2019 driven by new, younger clientele; exited markdowns in digital and mainline stores globally.
Burberry said 2022 guidance remained unchanged except wholesale, which is now expected to increase by approximately 60% year on year in the first half due to a stronger order book.
However, it warned of currency headwinds which would now hit sales by £114m and £40m on adjusted operating profit. Medium-term guidance for high single digit top line growth and meaningful margin improvement "remains firmly on track".
"Full-price sales accelerated as our collections and campaigns attracted new, younger luxury customers to the brand," said Marco Gobbetti, who announced last month he would stand down as chief executive after almost five years to join Italian fashion brand Salvatore Ferragamo.
"We saw strong growth across our strategic categories, in particular, leather goods and outerwear, and exited markdowns in digital and mainline stores."
Burberry said sales of goods at full price were up 121% compared with last year, and up 26% compared with 2019. Full-price sales online more than doubled compared with pre-pandemic.
Full-price sales of leather goods and outerwear such as jackets, quilts and downs doubled compared with last year, while there was triple-digit growth for shoe sales year on year.
MIXED INTERNATIONAL PICTURE
Sales levels grew 146% year on year in Europe, the Middle East, India and Africa (EMEIA), 27% in Asia Pacific and 341% in the Americas.
Sales in Asia Pacific have returned to pre-pandemic levels, up 7% compared with 2019 as popularity grew among new shoppers in mainland China, which were 55% higher than pre-pandemic, and in Korea, where they rose more than 90%. The Americas region is also back at pre-pandemic sales levels, up 34%.
However, EMEIA region sales are still 38% below pre-pandemic levels as the region continues to be hit by low levels of tourists and store closures because of Covid-19.
On average, 11% of Burberry's stores were closed during the trading period, although this reduced to only 3% by the end of June as pandemic restrictions continue to be eased in most markets. However, more than a third of stores are still operating on reduced hours.
Shares in the company fell on Friday, and AJ Bell financial analyst Danni Hewson said investors may have been disappointed with the unchanged forward guidance and foreign exchange headwinds.
She added that the impending departure of Gobbetti had "cast a pall" over the firm given his revival of the company's fortunes.
"Investors will be crossing everything that Gobbetti isn't followed out the door by top designer Riccardo Tisci who has helped drive a rejuvenation on the creative side of the business," Hewson said.
"The performance of the European part of the business is also disappointing when compared with a strong showing in the Americas and Asia. Burberry will be hoping that the return of international tourism provides a renewed catalyst for sales growth given its traditional reliance on Asian tourists buying from flagship stores in Europe."
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