Burberry’s strategic tweaks to its business are paying off with comparable sales up by 90% in the quarter ending June 26—and almost back to where they were in 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 prior, before anyone had even heard of Covid-19. The company’s stock was down by 5.4% late afternoon, but up 9.4% year-to-date.
There were strong gains across the Americas where full-price comparable store sales more than doubled versus two years ago, while in Mainland China they increased more than 55%, and in South Korea by about 90%.
The big worry for Burberry is Europe, the Middle East, India and Africa (EMEIA) where comparable store sales declined by 38% indicating just how reliant European high-end retail is on tourism and sales to travelers, particularly from the United States and China.
“Business in Europe and much of Asia is still heavily impacted by the significant decline of international tourist traffic,” the company admitted. Extensive and sequential lockdowns that continued to plague many core markets including the U.K. did not help with domestic footfall either.
Louise Deglise-Favre, associate retail analyst at data and analytics group GlobalData, said: “Burberry has seen a strong recovery in Q1 despite an average of 11% of stores being closed. However, while retail revenue increased to £479m, it remained 3.8% behind Q1 FY2019/20, placing the company significantly behind competitors LVMH and Kering, which demonstrated increases of 11.3% and 2.8% on the pre-Covid period in their latest results.”
Big shoes to fill
Nevertheless, a rebound based on important fixes such as moving away from markdowns in both physical stores and online, and being less reliant on outlets, is underway. Much of the turnaround is thanks to CEO Marco Gobbetti but his surprise decision to depart at the end of the year to take the reins at another brand that is moving into transformation mode: Salvatore Ferragamo, is another headache for Burberry as is seeks a successor.
On Burberry’s latest performance, Gobbetti said: “Full-price sales have accelerated as our collections and campaigns attracted new, younger luxury customers. We saw strong growth across our strategic categories, in particular leather goods and outerwear, and exited markdowns in digital and mainline stores.
“Despite the challenging external environment, we are very pleased with progress. The company is firmly set on a path of growth and acceleration and we are confident of achieving our medium-term goals.”
Helping in the conversion of younger consumers was a dedicated handbag campaign centred on the new Olympia shape. Featuring Kendall Jenner, singer-songwriter and Forbes 30 Under 30 FKA twigs, and rapper Shygirl, the campaign had a strong social media response.
More flagship stores coming
Burberry is continuing with the rollout of its new store concept. Since the end of June, the company has opened its first flagship carrying the new design in Sloane Street, London. The concept “transforms how customers experience our brand and product in a uniquely British luxury setting” according to Burberry.
Seven stores across Asia have introduced the new design and three more flagships will follow over the next 12 months. By the end of June, most of Burberry’s stores had reopened with just 3% of its estate still shuttered, though 35% of shops are still operating on reduced hours.
Burberry has also stepped up its social and environmental activity. In June the company announced plans to become ‘climate positive’ by 2040. To get there, the luxury house is scrutinizing its value chain in order to accelerate emissions reduction targets of 46% by 2030 and then net zero by 2040. And in championing diversity and inclusion, Burberry celebrated LGBTQ+ Pride last month by commissioning a special film based on inspiring stories, and made donations to several charities in the sector, including long-standing partner the Albert Kennedy Trust.
In its full-year outlook, Burberry said that its guidance remained unchanged, except for the wholesale business which is now expected to increase by approximately 60% in the first half due to a stronger order book. Medium-term guidance is for high single-digit top line growth and “meaningful” margin improvement.