Burberry reports record profits despite biggest market downturn

The British luxury brand, known for its signature beige checks and trench coats, reported a 23% increase in sales this year and a 38% increase in profits to £523 million ($649 million).

Shares of Burberry, which have fallen more than 12% this year, rose slightly in London trading on Wednesday.

The solid earnings came with a cautious outlook for the Chinese market, which saw sales drop 13% in the most recent quarter and is “around 40%”. Burberry’s chief financial officer Julie Brown said in an earnings call that “the company’s distribution is being disrupted by China’s strict coronavirus lockdown.” “I expect a rebound in China once the restrictions are lifted,” she said.

China’s recession coincided with the lockdown that began in March, dampening sales after a strong year. Burberry said its full-price business in mainland China grew 54% overall compared to two years ago.

“Our outlook depends on the impact of COVID-19 and the speed of consumer spending recovery in mainland China,” the company said in a statement.

The lockdown in China, the world’s second-largest economy, has disrupted supply chains and hurt consumer spending. domestic retail sales April plunged 11% According to government data, a year ago.

Barclays analysts were generally positive about Burberry’s performance, but highlighted the importance of China.

“Burberry, along with other sectors, is unlikely to regain momentum until it gains visibility into the Chinese lockdown and possible inflation and recession,” analysts said in a memo.

It was an important revenue decision for the brand’s new CEO, Jonathan Akeroyd, who took over as CEO in March. His predecessor, Marco Gobbetti, resigned in January after firmly positioning the brand in the luxury category.

When Gobetti announced her departure in the middle of the brand’s strategic turnaround in June of last year, stock price decline And analysts have raised the question of whether the new CEO will continue the process or try another pivot.

In Wednesday’s call, Akeroyd emphasized building momentum for the brand and accelerating growth.

Akeroyd said, “The ambition for true luxury is still right and will create the most desired value for brands and ultimately create the most sustainable and profitable business.”


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