Burberry sales rebound dented by China Covid lockdowns: reaction
Draconian Covid restrictions in China have dragged on sales at British luxury goods brand Burberry, as it attempts to rebound from the pandemic.
The group revealed that first-quarter sales fell 35 per cent in the country - a key market for its fashion products.
Before the pandemic, around a third of the global luxury industry relied on the spending of Chinese buyers, both at home and as tourists abroad. So the continued restrictions in the country took a big chunk out of Burberry’s performance.
Excluding China, sales were up 16 per cent globally, but when it is included they only nudged up 1 per cent.
But there appears to be a brighter future - since stores reopened in China in June the company said its performance there has been “encouraging”.
Chief executive Jonathan Akeroyd told investors: “Our performance in the quarter continued to be impacted by lockdowns in mainland China but I was pleased to see our more localised approach drive recovery in EMEIA (Europe, the Middle East, India and Africa), where spending by local clients was above pre-pandemic levels.
“While the current macroeconomic environment creates some near-term uncertainty, we are confident we can build on our platform for growth.”
The firm said little about the cost-of-living crisis, with bosses simply saying that they are “actively managing the headwind from inflation”..
The business said that sales in EMEIA grew 47 per cent when compared with the lockdown-hit first quarter of last year. Sales to American tourists rebounded in the region, it added.
Richard Hunter, head of markets at investment platform Interactive Investor, said: “Burberry’s trading progress has been hampered by another China crisis resulting from the country’s zero tolerance policy on Covid-19.
“The lack of Asian tourists coming to Europe in particular has been a bugbear for some considerable time, and the latest lockdowns in the region have inevitably had an impact.
“The group must now hope that pent-up demand is building again in China, and the early signs are tentatively encouraging,” he added. “Even so, until such time as that economy can resume firing on all cylinders, the clouds will inevitably linger.”
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