Burberry – Q1 Disappoints Despite Underlying Progress

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Burberry Group plc (LON:BRBY)’s first quarter comparable store sales rose 1%, as lockdowns in China took their toll. Excluding Mainland China, comparable store sales grew 16%. This was driven by higher domestic spending in other regions.

The group’s latest collections have been well received, with leather goods and outerwear comparable store sales, excluding Mainland China, rising 21% and 19% respectively. Burberry’s on track to add 65 newly designed stores in the 2023 financial year.

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Burberry is still expecting high-single digit revenue growth and 20% margins in the medium term, but warned “the current macro-economic environment creates some near-term uncertainty”.

The shares fell 5.3% following the announcement.

Burberry's Earnings

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown:

Burberry’s first quarter performance has sorely disappointed the market, with concerns around lacklustre growth rates. Mainland China is acting as a serious drag for the group, which is overshadowing successes elsewhere, including increased domestic spending in other markets, which is needed to offset lost tourism spending from Chinese visitors to Europe.

The group’s medium-term ambitions for revenue growth are admirable, but exactly how this will be achieved is the big question for newly minted CEO - ex-Gianni Versace leader Jonathan Akeroyd. The heavy lifting for Burberry’s strategic pivot is largely over, and the question now turns to one of delivery. The group’s done very well to forge all these new commercial tools – now it’s time to use them.”

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