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Burberry Group (BRBY), the upmarket fashion brand synonymous with that check print, has never been afraid of sticking its elegantly coutured neck out.
While its horned baseball cap, launched to celebrate the Year of the Ox, was firmly pointed at its lucrative Chinese clientele, presumably creative director Riccardo Tisci had just as clear a vision of his target “warrior” woman, when he launched Burberry’s latest collection featuring a pink ‘fluffy bunny’ style dress and a gold lamé trench coat.
But they say fortune favours the bold and that seems to be the case with Burberry, which relies on its Chinese customers for 40% of sales, saying it now expects full-year profits to come in ahead of expectations, after seeing a strong pick-up in sales.
Giving an unscheduled trading update in March, Burberry said it expects store retail sales to come in between 28% and 32% higher than in the same period last year. As a result, overall group revenue will fall by between 10% and 11% for the full year - lower than the 13% fall forecast by analysts.
This will be welcome news for the luxury brand and its investors who could only watch as sales - and its share price - plummeted when the pandemic broke and its lucrative Chinese market became the first to be forced into lockdown.
It will also put paid to the doubters who perhaps feared that Burberry was being a little premature in attempting to call the end of the pandemic and giving the signal that it was coming out of it OK, back in November; especially when that was swiftly followed by a second wave in the UK and Europe, during the all-important Christmas trading season.
Back then all the signs had been good, considering the year that had just been had. Burberry reported revenue of £878 million for the six months to 26 September. That was 31% down on the year before, but better than analysts had predicted, with comparable store sales having fallen by less than expected in the previous quarter. Adjusted operating profits fell 75% to £51 million.
Analysts had expected comparable sales to fall by around 12% in the second quarter, but Burberry said the actual drop was only 6% and that it had seen strong double-digit growth in key markets, including mainland China, Korea and the US during the half.
If next week’s figures come in as anticipated, then there will be sighs of relief all round. And perhaps a real sign that the beginning of the end of the pandemic-induced retail rout is coming.
With fellow luxury brand, jeweller Tiffany, having been snapped up by luxury goods behemoth LVMH, Burberry is one of the last listed luxury fashion brands to have control over its own future direction. If that involves ox horns and pink bunnies and that is what the customers want, then Burberry and its investors* can start to feel a little more confident that they have indeed ridden out the pandemic in style.
*Horned baseball cap optional.
Burberry’s full-year results are due out on Thursday.
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