- Burberry reported in its fiscal second quarter results on Thursday that same-store sales growth slowed to just 1% from 18% in the previous quarter as it lost momentum in China.
- Weak demand for luxury goods is weighing on businesses around the world, as economic uncertainty and rising inflation curb consumer spending on luxury goods.
A pedestrian (left) passes by a Burberry Group store in the Causeway Bay shopping district in Hong Kong, China.
Shaume Oleros | Bloomberg | Getty Images
LONDON — Burberry shares fell 9% on Thursday after the British luxury fashion retailer warned that full-year operating profit would be at the lower end of expectations due to a slowdown in global luxury spending.
The company also warned that it may not be able to meet its full-year sales forecast of low double-digit growth.
Burberry reported in its fiscal second quarter results on Thursday that same-store sales growth slowed to just 1% from 18% in the previous quarter as it lost momentum in China.
Burberry’s half-year operating profit fell 15% year-on-year to £223 million ($276.64 million), but CEO Jonathan Aykroyd said Burberry was “on track to meet its strategic goals”. “We are progressing towards this,” he said.
“We continued to build momentum around our new creative vision by introducing our Winter 23 collection, originally designed by Daniel Lee, in September,” Akeroid said in a statement.
“While the macroeconomic environment has recently become increasingly challenging, we remain confident in our strategy to realize our potential as a modern British luxury brand and remain committed to achieving our medium- and long-term goals. .”
Weak demand for luxury goods is weighing on businesses around the world, as economic uncertainty and rising inflation curb consumer spending on luxury goods.
LVMH, the world’s largest luxury goods group, also reported slowing quarterly sales last month, with Cartier owner Richemont warning of slower growth.
“A slowdown in global luxury demand is impacting current trading. If demand continues to be weak, it is unlikely that we will achieve our previously stated FY24 earnings guidance*,” Burberry said in a statement. mentioned in.
“In this context, adjusted operating profit will be closer to the lower end of the current consensus range (£552m to £668m)*.”
With the global challenges facing the industry, Burberry has spoken out About the unique challenges the UK currently faces as the government abolishes VAT-free shopping for international travelers.
A number of British retailers, including Burberry, have called on Chancellor Rishi Sunak and Chancellor of the Exchequer Jeremy Hunt to reconsider their decision on what critics call the “tourist tax”.
The Americas were also particularly problematic for Burberry this quarter, with same-store sales down 10%.
Russ Mould, investment director at brokerage firm AJ Bell, said: “The Americas is Burberry’s worst performing region and sorting this out will be a top priority for CEO Jonathan Aykroyd.” ” he said.
“Burberry shareholders will in some ways be relieved to see other luxury brands struggling, as it suggests that Burberry is not facing problems of its own making. All we can do is protect the brand, invest and wait for things to improve.” ”