British luxury brand Burberry (BRBY) reported a good start to the year with like-for-like retail store sales up 18% in the first quarter to 1 July, boosted by a strong recovery in mainland China following the lifting of Covid-19 related lockdowns.

Encouragingly, Burberry’s core categories of outerwear and leather goods performed well in the quarter.

Unfortunately, the performance in the Americas remained weak with sales down 8% and there was disappointment as the fashion house flagged an expected currency headwind of around £150 million to revenue and £70 million to operating profit this year.

And with the Chinese economy that is so pivotal to luxury spend slowing again, the reaction to the results was muted with Burberry’s shares cheapening 0.2% to £21.

COMPARABLE SALES UP 18%

Burberry’s overall comparable-store sales rose 18% year-on-year in the first quarter as sales rebounded by 46% in Mainland China.

Outside of mainland China, Burberry enjoyed strong growth in South Asia Pacific, Japan and Europe, Middle East, India and Africa (EMEIA) thanks to the return of well-heeled Chinese and other tourists, suggesting the luxury retailer has seen a good early response to brand elevation efforts and new designs.

‘During the quarter, we continued to invest in brand and product, with our new visual expression of Burberry driving the strong performance of outerwear, in particular heritage rainwear,’ explained Burberry.

‘Comparable store sales of leather goods also delivered double-digit growth, with women’s bags, especially the Frances shapes and vintage Burberry Check line performing well. We look forward to building on this when [chief creative officer] Daniel Lee’s debut runway collection launches in stores in September.’

WHAT DID THE CEO SAY?

Jonathan Akeroyd, chief executive of the trench coats, shoes and cashmere scarves seller, said he was ‘excited about Daniel’s product arriving in stores in September. While mindful of the uncertain macroeconomic environment, we are confident of achieving our full year 2024 and medium-term guidance.’

Burberry is sticking with its targets of low double-digit growth and an adjusted operating margin of around 20% for this year and £4 billion of sales over the medium term.

The London-headquartered fashion house also said it had begun a further share buyback, with £400 million of shares to be purchased by the end of the calendar year.

LEARN ABOUT BURBERRY

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