Burberry has recorded a 4% drop in sales over the Christmas quarter, but expects to recover from losses made in the first half of its financial year after a strong performance in the US.
The British luxury brand’s shares rose by as much as 15% on Friday after a rise in sales of scarves and trenchcoats over the Christmas period helped produce a better performance than the 12% drop in sales analysts had expected.
Burberry, known for its signature check as well as luxury trenchcoats and scarves, reported a 9% year-on-year fall in comparable stores sales in Asia Pacific over the 13 weeks to 28 December, a solid improvement from the 28% decline experienced in the previous quarter.
Scarf sales rose by about 12% after the company promoted them in stores and marketing, and rejigged its website to focus on the brand’s traditional strengths.
The company gave credit to its new “It’s Always Burberry Weather” outerwear campaign, part of a wider reinvention and rejuvenation of the brand, as well as its “Wrapped in Burberry” festive campaign.
In Europe, the Middle East, India and Africa, the retailer had a 2% year-on-year fall in the quarter, after a 10% fall in the previous quarter.
The US proved to be the highlight of the Christmas season, with shoppers driving retail sales up 4% in the final quarter of the year. Burberry said its refurbished store in New York performed well.
The company said the UK “underperformed” as big-spending tourists from Asia – traditionally a significant group of customers for the brand - chose to head elsewhere to buy their goods.
A turnaround in Asia is the priority but Kate Ferry, the finance director, said there was a “real opportunity” in the US, although it was too early to tell if the US administration would introduce tariffs on UK goods that might curtail growth there.
Joshua Schulman, the chief executive of Burberry who took the reins last summer, refused to comment on speculation that the designer Daniel Lee could depart the brand, but said he was “impressed by progress” on product. The group was “rekindling the creative and commercial alchemy” it had previously enjoyed by ensuring the design and sales teams worked more closely together, he said.
Schulman, the former chief executive of the US fashion brand Coach, was parachuted in last year to help revive the company’s fortunes after a number of profit warnings.
The company made a £41m operating loss in the first half of its financial year.
On Friday, Burberry said: “While we recognise we are still early in our transformation, we are encouraged by the response from customers and partners over the festive period. In light of our third-quarter performance, it is now more likely our second-half results will broadly offset the first-half adjusted operating loss, notwithstanding the uncertain macroeconomic environment.”
Analysts at RBC said that the relatively positive results were a “first (and early) step in the right direction”.
