Luxury fashion brand Burberry, which is famous for its thousand-dollar clothing, handbags, fragrances and other accessories, has warned investors that its profits this year will suffer a major blow as a result of consumers tightening their wallets when it came to spending on luxury goods during the Christmas season last year.
“We experienced a further deceleration in our key December trading period and we now expect our full year results to be below our previous guidance,” said Burberry (BURBY) -) in a new trading update.
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The company’s retail revenue declined by 7% during the 13 week period before Dec. 30, compared to the same time period in 2022. Store sales also declined by 4%.
“The slowdown in luxury demand is having an impact on current trading,” said Burberry in the update. “In this context, we now expect adjusted operating profit for the financial year ended 30 March 2024 to be in the range of £410m to £460m, below previous guidance.”
Consumers in the United States and Europe have been pulling back on their spending due to a tight economy that has caused inflation and additional roadblocks, and luxury brands are just one of the many casualties of it.
According to recent U.S. credit card data from Barclays and Citi, luxury goods spending in November last year declined by 15% year over year. Also, luxury fashion purchases that month decreased by 9.6% year over year.
Last year, high-fashion brand owner LVMH, which owns brands such as Christian Dior, Fendi and Givenchy, has even reported in its third-quarter earnings in October that it has seen its sales fizzle out after years of growth.
“After three roaring years, and outstanding years, growth is converging toward numbers that are more in line with historical average," said LVMH Chief Financial Officer Jean-Jacques Guiony in an earnings call.
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