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Burberry sees revenues rise for first time in 5 years, but China sees 2023 revised down

Burberry: on the up

Luxury fashion brand Burberry has reported its first rise in annual revenues for the FY 21/22, reporting comparable sales growth of 18% in the year to April 2 and a 21% rise in revenue to £2.83bn.

Adjusted operating profit jumped 32% to £523m thanks to improved pricing delivering better margins, allowing it to come in ahead of the £519.6m pencilled-in by analysts.

The company has seen a 7% drop in Q4, driven by the lockdown in mainland China, however, which has seen the company revise down expected revenues. In a statement it said: “While the current macro-economic environment creates some near term uncertainty, we are actively managing the headwind from inflation. Based on 6 May 2022 spot rates we expect a currency tailwind of £159m on revenue and £92m on adjusted operating profit in FY23”.

However, the retailer is bullish about 2022, citing the return of live runway fashion events, the opening of new concept stores and pop-ups, plus expanded use of social media are all helping drive sales.

Regionally, the Americas led full-price comparable store sales growth with sales almost doubling in the US compared with FY20. Full-price comparable store sales were also strong in South Korea where they increased 81% and in Mainland China where they rose over 50% compared with FY20, despite regional lockdowns impacting our performance, particularly in March. Burberry also saw improving trends in EMEIA despite an ongoing problems from reduced tourists due to COVID-19 related travel restrictions.

Across the year, the company saw a triple digit increase year-on­ year in follower growth rate on Instagram and continued strength in earned reach, up strong double digits versus last year. In addition, the company continued to see strong momentum on TikTok, passing the 1 million follower milestone in the fourth quarter.

Commenting on the results, Joshua Warner, Market Analyst, City Index, says: ’Burberry has reported the first annual rise in revenue in five years as it continues to rebuild its brand, roll out its new store concept and take the brand more upmarket by having tighter control over inventory to push up prices. New chief executive Jonathan Akeroyd, who took over at the helm in April, said he plans to build on the ‘strong foundation’ built by the company and will outline his plan to accelerate growth when Burberry releases its interim results this November.”

Warner continues: “With this in mind, Burberry reiterated its guidance to deliver high single-digit revenue growth and meaningful margin accretion over the medium-term, although it warned that this outlook is dependent on how the Covid-19 crisis develops in China and how quickly consumer spending recovers in the country. China is the major concern for Burberry going forward. The country, one of the largest markets for luxury goods in the world, reintroduced fresh lockdown measures in March and this has severely hit sales. Burberry said comparable sales in Asia Pacific were down 7% in the final quarter of the financial year as a result while sales surged 51% in EMEIA and 12% in the Americas.”

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