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Burberry’s fiscal 2024 is off to a promising start after its first-quarter sales were boosted by a recovery in China, a return of tourists in Europe and demand from top clients for core categories.
The British luxury house’s revenues grew 17 per cent on a reported basis to £589 million in the 13 weeks ended 1 July. Comparable store sales were up 18 per cent. Mainland China saw a strong rebound — with sales up 46 per cent — following the lifting of its strict Covid controls.
Luxury brands have been benefitting from a sharp uplift in sales from China, even though the country’s economic recovery is taking longer than expected, according to a recent report by Bain & Co. LVMH chairman and CEO Bernard Arnault’s high-profile trip to China last month signalled the ongoing importance of the market as a growth driver.
Burberry is particularly exposed to China (the region accounts for about 30 per cent of revenues, making it the brand’s biggest market). The region remains “an important market” that Burberry will “continue to invest in”, interim chief financial officer Ian Brimicombe asserted in a call with journalists on Friday morning. “China is a positive story for us, with lots more to look forward to.”
Brimicombe, who joined in April, pointed to a rebound in Chinese travellers in destinations like Hong Kong and Macau, as well as other parts of Southeast Asia, where Burberry’s sales rose 39 per cent year-on-year. Sales in Japan jumped 44 per cent and South Korea edged up 6 per cent.
Elsewhere, sales in Europe increased 17 per cent, driven by “healthy tourism flows” from the Middle East, Americas and Asian destinations, excluding China. Brimicombe said he was not expecting a significant uptick in tourism from Chinese tourists in Europe in the short term: “I think there are still issues with them getting visas, and flight capacity.”
The UK, Burberry’s home market, remains challenged due to the lack of VAT-free shopping for tourists. Chairman Gerry Murphy has been vocal about the impact of the UK government’s decision in 2021 to scrap the scheme, which has also hampered growth at other British brands like Mulberry. “It’s an ongoing dialogue between the British industry and the government. But for now, we’re seeing Brits and other nationalities go to continental Europe for their buying,” said Brimicombe. For the UK, that’s “disappointing”, he added. “We’re not really on a level playing field at the moment.”
The US is also a weak spot, with sales down 8 per cent, compared with a 7 per cent drop in the fourth quarter of its 2023 fiscal year and a 1 per cent decrease in the third. Brimicombe attributed the accelerating decline to the ongoing macroeconomic slowdown. “We see similar trends coming through quarter-on-quarter,” he said. “The aspirational shopper has weakened a little, but, relatively, we’re picking up the higher-net-worth individual cohort and they’re buying higher priced products. That is sort of stabilising our negative single-digit outcome.” Globally, sales for core categories such as leather goods grew 13 per cent, while outerwear rose 36 per cent, driven by interest in heritage rainwear.
The dip in the US is temporary, Brimicombe believes. “We’ve got a lot of confidence in the Americas going forward [and are] investing very heavily in that market.” The brand recently opened a pop-up on New York’s Fifth Avenue while refurbishment of its 57th Street flagship is underway. A new Rodeo Drive store is also due to open shortly. Expect “a high degree of activity” in the region this year, as well as across the world, said Brimicombe.
Chief creative officer Daniel Lee was appointed in September 2022 to re-energise Burberry’s collections. Earlier in the week, the brand unveiled its Autumn/Winter 2023 campaign photographed by London-based photographer and filmmaker Tyrone Lebon on the Isle of Skye, Scotland. It was the first campaign to feature pieces from Lee’s debut collection, which was presented at London Fashion Week in February, and will arrive in stores this September. “It’s got Britishness written all over it,” said Brimicombe. “It’s really at the heart of what we’re doing at this brand and is our unique proposition to the world.” He declined to share details on buyer interest, but said that the AW23 collection has had “great reception so far”.
Burberry is maintaining its guidance of high single-digit revenue CAGR from fiscal 2020 and a low double-digit growth in fiscal 2024, as it works towards a medium-term target of £4 billion in full-year revenues. “We've done a lot of preparation in the front half [of the year] and kept the core collection going strong,” says Brimicombe. “We will be louder and prouder coming out from this point on. There’s a lot to look forward to.”
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