Burberry shares plunge as it blames tourist tax for luxury slowdown
British fashion house Burberry has blamed the cutting of VAT-free shopping for international tourists for its poor performance in the UK, as the group warns that earnings could be at the lower end of previously outlined expectations.
The iconic trench coat maker hit out at the government’s decision to scrap the so-called tourist tax, as part of its interim results, where it revealed a six per cent loss year-on-year in adjusted operating profits to £223m.
After the poor results, its share price plunged by nine per cent after the open.
Sales in its stores also performed poorly, falling 10 per cent across the Americas and growing just one per cent overall, as buyers scaled back on expensive purchases amid the cost of living crisis.
“UK continued to lag Continental Europe in attracting tourism spend compared with pre-pandemic levels, reflecting the withdrawal of VAT refunds in the UK since January 2021,” the brand said.
The government ditched the VAT refund for tourists in 2021 when Prime Minister Rishi Sunak was Chancellor.
A host of international tourists are now favouring the likes of Italy and France when choosing a shopping holiday, where the tax break remains in place.
Prominent figures in London’s retail and hospitality space have been badgering the Treasury for months to reinstate the tourist tax.
Earlier this month, the founder of Rocco Forte Hotels, Sir Rocco Forte, told Morning Wire that there are two million fewer tourists visiting London since the government removed VAT-free shopping for international tourists.
Burberry said: “The slowdown in luxury demand globally is having an impact on current trading. If the weaker demand continues, we are unlikely to achieve our previously stated revenue guidance for FY24.
“In this context, adjusted operating profit would be towards the lower end of the current consensus range (£552m-£668m).”