Burberry: Luxury British brand’s investors hopeful of China spending resurgence
Luxury retailer Burberry could prove its buyers have been sheltered from cost-of-living pressures when it unveils its full-year financial results on Thursday.
The historic British brand, which has benefitted from the reopening of the Chinese economy this year, is expected to show a jump in profits and sales for the year ending in March.
The forecast comes despite a number of retailers flagging a downturn in consumer demand as cost pressures squeeze household budgets.
Burberry, known for its trench coats and checked cashmere scarves, took a hit from lockdown restrictions in mainland China, its biggest market.
The world’s second largest economy only began significantly easing its strict zero-Covid policy at the end of last year, to the relief of investors and global businesses.
Sales declined by nearly a quarter in the region in its third financial quarter, dragging down its total sales figure which was otherwise boosted by strong demand in Europe, the Middle East and Africa.
But investors will be hoping the return of shoppers in Asia will bolster revenues in its final quarter.
Burberry, along with other designer brands like French handbag-maker Hermes, have proved wealthy shoppers have not been cutting back on big-ticket purchases despite soaring inflation.
Hermes revealed its sales surged by a quarter in the first three months of the year, helped by a resurgence of shoppers in China and tourists in the UK and Italy.
Luis Vuitton owner LVMH reported a 17% jump in sales last month amid the rebound in China’s luxury market.
Burberry said accessories like bags, scarves and belts, as well as its famous trench coat, were selling well in its last update.
It counts high-profile figures like Tottenham Hotspur striker Son Heung-min and singers Shakira and Burna Boy among the faces of its campaigns.
Wealthy layers of protection from inflation
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said Burberry’s customers have “wealthy layers of protection” from inflation.
She said: “The return of the high spending Chinese tourists to domestic stores but also international outlets has been long awaited and any signs of a weaker than expected rebound is unlikely to be well received.
“Although an expected slowdown in the key markets may not bode well for other mid-range clothing brands, Burberry’s core customers have wealthy layers of protection from inflationary pressures.
“Instead, keeping the brand in favour with demanding fashionistas is much more important and while those elevation efforts don’t come cheap, the creative focus has been reaping rewards.
“Burberry’s all-important leather bags and coats have been selling well, a trend which will be closely watched for any signs of strain.”
The company is expected to report group revenues of £3.1 billion for the full year, up from £2.8 billion the previous year, according to a consensus compiled by analysts.
It is also predicted to report an operating profit of £640 million, up from £530 million a year ago.
Burberry’s share price neared an all-time high earlier this year as investors cashed in on the profitable firm.
Press Association – Anna Wise