Burberry Beats Forecasts With Stronger Than Expected Christmas Sales
The dark clouds have begun to lift at Burberry, which reported a 7 percent decline in third-quarter retail revenue to 659 million pounds, helped by strong sales in the Americas region.
In a trading update on Friday, the company guided towards a stronger second half, with results expected to offset the first-half adjusted operating loss, despite the uncertain macroeconomic environment.
Investors responded with enthusiasm, sending Burberry shares up nearly 15 percent to 12.31 pounds in morning trading following the update.
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During the three months to Dec. 28, sales in the Americas were up 4 percent, with the EMEIA region, which comprises Europe, the Middle East and Africa dipping 2 percent. Asia Pacific was down 9 percent.
Comparable store sales dipped 4 percent, compared with analysts’ expectations of a 12 percent fall.
Burberry chief executive Joshua Schulman, who jumpstarted the turnaround with a focus on Burberry’s core outerwear category, said the company has been moving “at pace” towards growth.
“We are encouraged by the response to our ‘It’s Always Burberry Weather’ outerwear campaign and ‘Wrapped in Burberry’ festive campaign. These activations resonated with a broad range of luxury customers leading to an improvement in brand desirability and strength in outerwear and scarves,” Schulman said.
“The acceleration of our core categories reinforces our belief that Burberry has the most opportunity where we have the most authenticity and that our strategic plan will deliver sustainable, profitable growth over time. However, we recognize that it is still very early in our transformation and there remains much to do,” he added.
Schulman joined Burberry last summer, charged with stemming double-digit declines in sales, and restoring the company to profitability in what has been a difficult climate for luxury goods.
Analysts were quick to praise Burberry’s surprise uptick in like-for-like store sales, with Citi rushing out a report titled “Here Comes the Sun,” and RBC Capital Markets describing the Christmas trading as “strong.”
Piral Dadhania of RBC said the “significant acceleration” in revenue growth was well ahead of expectations. “The improvement in trends was driven by core outerwear and scarves categories consistent with [Schulman’s] strategy to re-center the brand to areas of core competence.”
As reported, Burberry posted a first-half operating loss of 53 million pounds on the back of a 22 percent decline in revenue to 1.09 billion pounds.
At the time, Schulman said the company was “acting with urgency to course correct, stabilize the business and position Burberry for a return to sustainable, profitable growth.”
He said he’s convinced that Burberry’s “best days are ahead.”
In the first six months, comparable store sales were down 20 percent, with double-digit declines across all regions. The company reported an adjusted operating loss of 41 million, compared with a profit of 223 million pounds in the corresponding period last year.
