Burberry has reported slowing sales growth in its latest financial quarter as the impact from Covid-19 restrictions persisted even as sales remained at just above pre-pandemic levels.
The luxury fashion retailer said that total revenues for the 26 weeks to 25 September were £1.2bn, up 38% year on year. However, like-for-like store sales rose by only 6% year on year in the second half of that period.
Shares slumped by 5%, making it one of the biggest fallers on the FTSE 100 on Thursday morning.
The company blamed Covid-19 restrictions in the Asia and Pacific region for the sales difficulties. In China, a key market for luxury goods, restrictions were “especially impactful […] reducing footfall materially, leading to an adverse effect on revenues”, the company said. However, it added that there was a “good recovery” in September.
In-store sales in Europe, the Middle East, India and Africa also continued to struggle, remaining down by 25% in the latest financial quarter.
Zuzanna Pusz at UBS, an investment bank, noted that Burberry’s like-for-like sales growth “looks rather weak compared to peers”.
Richard Hunter, head of markets at Interactive Investor, an investment platform, said the share price drop reflected the “weakening of sales during the second quarter, even though numbers for the first-half as a whole are in comfortably positive territory”. It also suffered from “generally high expectations”.
Burberry is in the process of switching management, after it poached the head of Versace, Jonathan Akeroyd, to take over as chief executive from Marco Gobbetti, who was part way through a turnaround plan aimed at taking Burberry further upmarket, with prices to rival its French and Italian rivals. Gobbetti will step down at the end of the year, after saying he wanted to return home to Italy.
The move upmarket for the British brand – best known for its trenchcoats and signature check – has meant the company has reduced discounts, focusing instead on growth in products sold at full price.
Gerry Murphy, Burberry’s chair, said the company “made strong progress in the half”. Murphy, who will oversee the company from January until Akeroyd starts in April, highlighted “double-digit percentage” growth in full-price sales, which he said was generating fatter profit margins on products.
He added: “We are seeing an acceleration in performance in countries less impacted by travel restrictions and we remain confident of achieving our medium-term goals.”
Burberry also reinstated its dividend and restarted a share buyback programme.