Published On : 05/18/2023

Burberry shares drop as weak US demand overshadows China rebound

By Suban Abdulla

LONDON (Reuters) -British luxury fashion brand Burberry on Thursday reported stronger-than-expected fourth quarter sales driven by a rebound in China but continued weakness in the United States sent its shares down sharply.

Comparable store sales at the FTSE 100 group rose 16%, accelerating from 1% in the third quarter and above a company compiled consensus of 14%, with sales in its biggest market China rising 13% in the three months to April 1.

China, which is showing signs of recovery after it dropped strict COVID-19 restrictions, accounted for 30% of the business.

But shares in the group were down 6.2% in early trading after the Americas continued to be a weak spot, with quarterly sales declining 7% in Q4. It also maintained its 2024 and medium-term targets while stating it was “mindful of macroeconomic and geopolitical environment”.

Burberry shares had hit record highs in recent months on the back of optimism over the recovery in China.

Chief executive Jonathan Akeroyd said the financial performance was supported by a recovery in Mainland China and “good progress” in Burberry’s core leather goods and outwear offerings.

Europe performed strongly, with sales up 27% in the period, helped by a rise in tourists from the Middle East and Americas.

Thursday’s results follow creative director Daniel Lee’s first collection at London Fashion week in February as well as the launch of a new logo and campaign.

The company said a new collection, which includes new shoes and bags, will land in stores and online in September.

Leather goods sales were up 12% in the 2023 financial year and 15% higher in the final quarter, boosted by sales in the Lola and Frances women’s bags as well as the launch of the vintage Burberry Check line.

Full year revenues at the 167-year-old business rose 7% to 3.1 billion pounds ($3.91 billion), in line with expectations, and up from to 2.83 billion a year ago.

Burberry’s luxury rivals LVMH and Hermes have also reported a bounce in first quarter sales due to a recovery in China and wider Asian markets.

($1 = 0.7923 pounds)

(Reporting by Suban Abdulla; editing by James Davey and Kate Holton)

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