Burberry offset a plunge in Chinese sales of more than a fifth amid Covid disruption, thanks to the return of tourists to Europe who snapped up bags, scarves and trenchcoats in the run-up to Christmas.
The British luxury goods firm reported a 1% increase in global sales in the three months to the end of December, below its 2% target and sharply down compared with the 11% growth reported in the previous quarter.
Burberry sales plunged 23% year-on-year in mainland China due to Covid lockdowns followed by a surge in cases as restrictions were lifted.
However, sales boomed across Europe rising 19% as tourists flocked back to London, Paris and Milan. Japan, South Korea and the southern Asia Pacific region also performed well, up 10%, 28% and 15% respectively.
Dresses and knitwear enjoyed “mid-teen” double-digit percentage sales growth, and outerwear such as Burberry’s signature trenchcoat grew in the “high single digits” outside China.
Accessories also boomed with a double-digit increase in leather goods, led by the Lola bag, while Burberry’s signature beige check cashmere scarf flew off the shelves accounting for 60% of all sales in the category.
The company said it expected to remain on track to hit medium-term targets, which include high single-digit revenue growth and improving margins, and is beginning to see a recovery in China.
“In December we did see additional pressure on traffic [to stores] due to a surge in infections in China,” said Julie Brown, Burberry’s finance and operating chief.
“However, in January as China re-opened we are seeing very promising signs. There has been a change in traffic, we are seeing strong trade coming through. The timing and the pace of recovery is likely to be somewhat unpredictable but we are confident in the long term opportunity.”
The 167-year-old company said there were also promising signs with Chinese tourists returning to Hong Kong and Macau.
While its European operations performed strongly, Brown reiterated comments made in November that London was losing out to Paris and Milan when it comes to tourist shopping. She said that the UK government’s decision to stop allowing tourists to reclaim VAT on shopping purchases has hurt Britain’s status as a prime holiday shopping destination.
“We are seeing better [sales] statistics going into Paris and Milan and continental Europe than we are in London,” she said. “We effectively have a tourist tax in the UK. We are losing the home advantage. We want to make the UK the number one shopping destination that it was before.”
The company will unveil its return to “Britishness” under its new chief executive, Jonathan Akeroyd at London fashion week next month.