(Alliance News) - Burberry Group PLC on Wednesday said its full price sales recovered during its festive quarter, helped by growth in mainland China, though trading in Europe continued to be hurt by Covid-19 restrictions.
The retailer expects "regional disruptions" due to Covid-19 for the remainder of its financial year, and it warned that the UK will lose its attractiveness as a luxury shopping destination following the end of the VAT retail export scheme. The policy allowed non-EU tourists to get VAT refunds.
Burberry shares were up 4.5% at 1,815.50 pence each in London on Wednesday morning, the best large-cap performer.
In the 13 weeks to December 26, its third quarter and a period which includes the crucial Christmas stretch, retail revenue fell 4.3% year-on-year to GBP688 million from GBP719 million a year earlier. Comparable store sales fell 9%, following growth of 3% a year earlier, the luxury brand added.
"Despite the challenging external environment, we made good progress on our strategic priorities in the quarter. We saw a strong increase in full-price sales as our collections and communication resonated well with new, younger clientele as well as existing customers. Our localised plans and digital capabilities helped drive growth in rebounding markets and we implemented our planned reduction in markdown," Chief Executive Officer Marco Gobbetti said.
By region, Asia Pacific comparable store sales rose 11% annually, "with strong growth in mainland China and Korea".
In the Americas, comparable store sales were down 8%, with a "mid-teens" climb in full price sales being offset by planned reductions.
The decline in the Europe, the Middle East, India, & Africa region was much greater, however. Burberry, famed for its checked print and trench coats, saw its wings clipped by travel restrictions with comparable store sales tumbling 37%.
Luxury goods brands like Burberry generate hefty amounts of sales through tourism. Travel restrictions therefore, closed off big revenue contributors.
Burberry hailed its online growth, however.
"In the Covid-19 context, digital remains a key driver of growth for the business. In the quarter, our digital innovations such as pop-ups and local activations on .com supported more than 50% full-price growth in the channel. In addition, we continued to use our digital capabilities to link customers to our stores in periods of limited traffic or lockdowns, including through our new live chat functionality on .com, virtual appointments and virtual client events," the company explained.
Burberry said it currently has 15% of its stores closed with 36% operating with reduced hours or other restrictions.
"Given this outlook, we expect trading will remain susceptible to regional disruptions as we close the financial year," the company said.
Looking ahead, it also expects a "modest increase in border trade compliance costs" as a result of the UK's Brexit trade deal with the EU.
"The VAT retail export scheme previously allowing VAT refunds for non-EU tourists has now been stopped. This development, which will reduce the attractiveness of the UK as a destination for luxury shopping, will have limited impact on revenue in the current year given the low levels of tourist traffic, but is expected to have a more significant impact when travel flows resume with sales likely to shift between countries. We are looking at ways to mitigate any impact this has as tourists return to mainland Europe," Burberry commented.
By Eric Cunha; ericcunha@alliancenews.com
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