Burberry’s sales rebound to pre-pandemic levels as younger shoppers pile in

Luxury British fashion brand attracts new clientele through savvy ad campaigns with stars Kendall Jenner and Marcus Rashford

Despite the positive outlook, Burberry’s share price dropped in early trading on Friday. Reuters

Luxury British fashion house Burberry said retail sales rose above pre-pandemic levels in the first quarter of its fiscal year.

The increase was driven by new, younger customers attracted to the brand’s savvy marketing campaigns with stars such as model Kendall Jenner and England footballer Marcus Rashford.

Burberry, which is hunting for a replacement for departing chief executive Marco Gobbetti, said strong growth in trench coats and handbags caused retail revenue for the 13 weeks to June 26 to rise 86 per cent, to £479 million ($661.4 million), with comparable shop sales climbing 90 per cent compared with the same period last year and up 1 per cent on 2019 figures.

Mr Gobbetti, who joined the company in 2017, said despite the “continuing challenging external environment”, the company has made an “excellent start to the new fiscal year".

“Full-price sales accelerated as our collections and campaigns attracted new, younger luxury customers to the brand,” Mr Gobbetti said in a statement posted on the London Stock Exchange, where the FTSE 100 company is listed.

“We saw strong growth across our strategic categories, in particular leather goods and outerwear, and exited markdowns in digital and mainline stores.”

Despite the positive outlook, Burberry’s share price was down 3.29 per cent to £20.02 at 9.21am London time on Friday.

“Perhaps this reflects some disappointment that despite a seemingly very strong start to the year, guidance for the 12-month period remains unchanged and concern that the company is facing some hefty headwinds in terms of movements in the foreign exchange markets," said Danni Hewson, financial analyst at AJ Bell.

Burberry shares crashed towards the end of June when Mr Gobbetti, credited with reviving the fashion label, announced his shock resignation.

The shares dropped more than 8 per cent after Burberry, renowned for its trademark trench coats, said Italian Mr Gobbetti, 62, would step down at the end of this year to join luxury goods group Salvatore Ferragamo.

Like all retailers, the company was hit hard by the pandemic with 11 of its 454 stores, concessions and franchises around the globe still closed, 35 per cent of shops operating on reduced hours and the lack of international tourism still hampering demand.

However, analysts expect its new London Sloane street flagship outlet to become a major draw when international travel restrictions eventually ease, with the company also planning three more flagship stores around the globe.

For now, online purchases are helping to make up the slack, with digital full-price sales more than doubling over the first quarter versus the same period in 2019.

“When the company is firing on all cylinders once more, there is good potential for growth across all channels,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

Ms Streeter said Burberry has a knack of signing up stars to catch the mood of its young and growing fan base.

“Its campaign featuring Marcus Rashford engaged followers on social media, with its mural of him in Manchester, a magnet for anti-racist campaigners,” she said.

“The company’s cachet has acquired another edge of cool with its Olympia handbag campaign featuring singer FKA Twigs, London DJ Shygirl and model Kendall Jenner. This line-up helped engagement across social media platforms almost double compared to the previous Pocket campaign.”

Mr Gobbetti said the label, which has been refreshed by a TB monogram introduced by designer Riccardo Tisci, was "firmly set on a path of growth and acceleration" and he was confident it would meet its medium-term target of high single-digit top-line growth.

Internationally, the company said it continued to see strong growth in mainland China and Korea, helping comparable store sales in Asia Pacific rise 27 per cent year on year.

The Americas were a stand-out, it said, with comparable sales up 341 per cent on a year ago and 34 per cent up on two years ago, again driven by a new and younger clientele.

Europe, however, has not recovered, with shops still affected by coronavirus restrictions as the continent contends with growing case numbers in some countries and weaker tourist footfall. Comparable store sales were 38 per cent lower than two years ago, it said.

There was an acceleration of full price purchases in the first quarter, with growth of 121 per cent compared with last year and 26 per cent on 2019. In America and mainland China those sales more than doubled and in Korea they shot up by 90 per cent.

“Making a heel turn away from in-store markdowns and reducing outlets was a risk, but it’s paying off for the company,” Ms Streeter said.

Gaming is the next mission on the horizon, she said, with the company tapping into the fast-growing desire for NFTs with its collaboration with Mythical Games.

“It’s launching skins and accessories as non fungible tokens for Blankos Block Party, which are likely to become sought-after collectables as the gaming and fashion world collide,” Ms Streeter said.

Analysts expect Burburry's new London Sloane street flagship store to become a major draw when international travel restrictions eventually ease. Reuters

Looking ahead, Mark Crouch, analyst at a multi-asset investment platform, said the company is on course for high single-digit growth this year after its wholesale order book was up 60 per cent year on year.

“The start of the pandemic was particularly difficult for Burberry; not only did it have to close its physical store estate but the market for luxury goods tanked," Mr Crouch said.

“However, now optimism is returning, and many economies are now in full-on recovery mode, which has brought with it an increase in consumer spending.”

But Mr Gobbetti’s departure still poses a challenge for the company, as many believe he has been instrumental in the turnaround for the company’s fortunes with investors questioning the company’s ability to keep pace without him.

“Finding the right replacement to fit his large shoes won’t be an easy task,“ Ms Streeter said.