Burberry’s turnaround is showing green shoots. The British luxury brand said comparable store sales were down 4 per cent to £659 million on a reported basis in the third quarter ended 28 December 2024 — beating analyst expectations of a 12 per cent decline. Shares jumped 15 per cent in early day trading following the news (analysts predict the share price to normalise at high single digits by the end of the day).
The company said it was “encouraged by the response from customers and partners over the festive period” and now expects its second-half results to offset the operating loss in the first half of the year. “We are acting with urgency to stabilise the business and position the brand for a return to sustainable, profitable growth supported by cash generation and balance sheet strength,” CFO Kate Ferry said during the earnings call on Friday.
In November, CEO Joshua Schulman introduced his ‘Burberry Forward’ strategy to reignite the struggling British brand, which includes a stronger focus on the outerwear category, a new marketing strategy and a more diversified pricing structure.
In Q3, outerwear and scarves outperformed globally thanks to improvements in visual merchandising in stores, Burberry said. The brand also debuted an outerwear campaign, titled ‘It’s Always Burberry Weather’, as well as its festive campaign ‘Wrapped in Burberry’. Schulman said in the earnings call that the campaigns performed well and he has seen “new customer growth in the month of December for the first time in over two years, and we’ve seen an increase in the brand desirability as well, which is the leading indicator of purchase intent”.
There are a number of reasons why Burberry beat expectations in Q3, Bernstein luxury goods analyst Luca Solca wrote in a note. “First, Richemont [earnings] last week pointed to an overall cyclical demand improvement affecting all nationalities,” he said. Likewise, Brunello Cucinelli also had a strong quarter, which could benefit investor sentiment in the luxury sector. “Second, Burberry has been actively exiting inventory through material discounts throughout its full-price and outlet retail network. Third, the new Burberry direction seems to be promising, with good market feedback on a back-to-basics strategy.”
Schulman declined to comment on the speculation that Burberry creative director Daniel Lee will be leaving to join Jil Sander. Instead, he reiterated that his aim is to bring design into closer contact with the rest of the company, particularly merchandising and marketing (he said in November that design was operating in a silo).
Asia-Pacific sales were down 9 per cent with Mainland China down 7 per cent and Chinese tourist spending reported flat compared with last year. South Asia-Pacific fell 19 per cent and South Korea declined 12 per cent. Meanwhile, Japan marked a bright spot for the region with sales up 4 per cent.
EMEIA (Europe, the Middle East, India and Africa) sales declined 2 per cent. Globally, EMEIA tourist spending was flat. Ferry said that within the region, the UK and the Middle East underperformed.
Sales in the Americas grew 4 per cent, boosted by local spending and led by performance in New York, where Burberry reopened its refurbished flagship on 57th Street. When asked about the threat of new tariffs on imports into the US under President Donald Trump, Ferry said it is too early to comment. Burberry is focusing on what it can control, she said, while reiterating that the region remains a focus.
Schulman added that US department stores have said that “even though their current business with Burberry had been challenging, they see a real opportunity that Burberry uniquely plays in their mix for their customer, so they are rooting for our comeback”.
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