Luxury goods retailer Burberry (BRBY) said it has made an ‘excellent start’ to the new financial year, with comparable stores sales rebounding by 90% in the first quarter to 26 June 2021 versus last year’s pandemic-disrupted period.
Encouragingly, comparable store sales were 1% ahead of pre-pandemic levels too, though the shares cheapened 3.1% to £20.05 as the leather goods, jackets and shoes seller warned unfavourable currency rates will hit earnings this year.
During the quarter, Burberry achieved 26% full-price sales growth versus the comparable pre-pandemic period two years ago, as the recovery enabled it to halt the discounts needed to drive sales at the height of the Covid crisis and sales proved strong everywhere from the Americas and mainland China to Korea.
‘Full price sales accelerated as our collections and campaigns attracted new, younger luxury customers to the brand,’ explained CEO Marco Gobbetti.
‘We saw strong growth across our strategic categories, in particular leather goods and outerwear, and exited markdowns in digital and mainline stores.’
FX WARNING
Burberry left guidance for the year to March 2022 unchanged, save for the wholesale business, now expected to grow by approximately 60% in the first half due to a stronger order book, and also foreign exchange, which the FTSE 100 firm now expects to created stiff sales and adjusted operating profit headwinds of £114 million and £40 million respectively this year.
Burberry’s medium-term guidance for high single digit top line growth and meaningful margin improvement ‘remains firmly on track’.
Last month, Burberry shocked investors with the news Gobbetti plans to step down as chief executive and leave the company at the end of 2021.
Set to return to Italy and take charge of Salvatore Ferragamo, Gobbetti is credited with the positive transformation of Burberry and for taking the brand more upmarket.
THE EXPERT’S VIEW
Danni Hewson, financial analyst at AJ Bell, said: ‘A pall has been cast over Burberry by the impending departure of Marco Gobbetti who, notwithstanding the pandemic, has done a good job of reviving the company’s fortunes with a move up the luxury food chain.
‘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.
‘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.’
