Burberry shares slip despite pandemic rebound

·2-min read
Burberry shares slip despite pandemic rebound
The group also warned about future Chinese spending patterns, which it said may have an 'adverse' impact on sales. Photo: John Sibley/Reuters

Burberry (BRBY.L) fell out of fashion with investors on Thursday despite revealing that its revenues were back to pre-pandemic levels.

The luxury designer said a rise in full-price sales helped drive margin and profits higher in the six months to the end of September, with strong growth in the Americas, mainland China, and South Korea.

However, other regions were under pressure from reduced tourist levels, the FTSE 100 firm said. Sales in Europe were still down 31% compared to where it was before the coronavirus pandemic struck.

The group also warned about future Chinese spending patterns, which it said may have an “adverse” impact on sales.

Overall revenue climbed 38% to £1.2bn ($1.6bn) during the half-year, up from £878m a year earlier, with adjusted operating profit rising to £196m.

Leather products in particular performed well, seeing double-digit growth, while demand for outerwear and menswear also strengthened.

Read more: UK economy grows in September but recovery slows

The company, which recently took on Versace boss Jonathan Akeroyd to be its new chief executive. hiked its interim dividend by 3% to 11.6p per share, and restarted a £150m share buyback.

But shares fell as much as 8% on Thursday in London.

“We have made strong progress in the half,” Gerry Murphy, chairman of Burberry, said. “We are seeing an acceleration in performance in countries less impacted by travel restrictions and we remain confident of achieving our medium-term goals.”

Burberry has been rolling out 15 new digital-first concept stores, and confirmed on Thursday that there are a further 50 in the pipeline before it reaches the end of the financial year.

Its new boss, Akeroyd, will join the firm next April, succeeding Marco Gobbetti, who announced his departure in June as he leaves to take the top job at luxury Italian group Salvatore Ferragamo.

Burberry shares fell as much as 8% on the day. Chart: Yahoo Finance
Burberry shares fell as much as 8% on the day. Chart: Yahoo Finance

The clothing retailer is also on track to become carbon neutral and source 100% renewable electricity across its own operations by early 2022.

At COP26 in Glasgow this month it announced a biodiversity strategy to protect, restore and regenerate nature.

Adam Vettese, analyst at multi-asset investment platform eToro, said: “China is a key market for Burberry, and so any slowdown in the Chinese economy or a tightening of consumer spending will have an outsized effect on Burberry’s bottom line.

“This warning has clearly spooked investors, despite the firm trying to compensate by reinstating its interim dividend and announcing a £150m share buyback.”

Watch: Burberry poaches new boss from Versace

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