Follow us

Menu
PARTNER WITH USFREE NEWSLETTER
VISIT TheIndustry.beauty

Burberry sees full-year outlook weighed on by China COVID-19 lockdowns

Jeremy Lim
18 May 2022

Despite reporting a jump in annual earnings as sales rebounded, Burberry has warned that its outlook for the year ahead depends on COVID-19 lockdowns and a recovery in spending across China.

The luxury fashion firm reported underlying operating profits of £523 million for the year to 2 April, up from £396 million the previous year as like-for-like sales jumped 18%. On a reported basis, pre-tax profits lifted 4% to £511 million.

But the group said comparable store sales growth slowed to 7% in its fourth quarter as COVID lockdowns in China (its biggest market) hit March trading.

The group said: "Our outlook is dependent on the impact of COVID-19 and rate of recovery in consumer spending in mainland China. While the current macro-economic environment creates some near-term uncertainty, we are actively managing the headwind from inflation.”

The group’s results showed that compared with two years ago before the pandemic struck, like-for-like sales were 6% higher thanks to restrictions lifting as economies emerged from the pandemic.

However, China trading has come under pressure in recent months as it has battled to contain a surge in cases of the virus. Despite this, Burberry still saw comparable store sales jump 50% in mainland China over the full year.

Looking ahead, Burberry expects a £159 million on revenue and £92 million on adjusted operating profit in fiscal year 2023.

New Burberry CEO Jonathan Akeroyd, who took over the role last month, said: “The company has made great progress over the last five years to elevate the brand, product and customer experience into the luxury space. I look forward to setting out my plans for building on these strong foundations and accelerating growth at the interim results in November.”

Gemma Boothroyd, Freetrade analyst commented: "To boost its prestige, Burberry cancelled price cuts on mainline items. New CEO Jonathan Akeroyd will be hoping that by winding up markdowns, the retailer will re-establish its exclusivity. But the only way that strategy pays off is if countries with high spending power play ball.

"Akeroyd’s ability to hit the ground running heavily depends on demand from the Chinese market. Today’s results show the demand is there, the problem is, China’s COVID policies are out of his control. So investors still twiddling their thumbs on Burberry’s pre-pandemic share price recovery will be waiting a while still."

Free NewsletterVISIT TheIndustry.beauty
cross