19th Jan 2022 14:10
(Alliance News) -Â Burberry PLC's strategy of focusing on full price sales appears to be working as it waits for mass tourism to return, analysts said on Wednesday.
Burberry shares were up 6.0% to 1,860.00 pence in London on Wednesday afternoon. The stock is up 7.0% in the past 12 months.
The luxury fashion retailer, famed for its trench coats and check print, said retail revenue in the 13 weeks to December 25 - the company's financial third quarter - rose 5.1% annually to GBP723 million from GBP688 million.
Full-price comparable store sales improved 15% year-on-year, with all comparable store sales up 7%. On two years prior, being before the impact of the pandemic, full-price comparable store sales were up 26%, but all comparable store sales were down 3%.
Burberry expects adjusted operating profit for the financial year that ends on April 2 to rise 35%, at constant currency and excluding the impact of an extra week of trading. Adjusted operating profit in the previous financial year, came in at GBP396 million, down by 8.5% on financial 2020.
Burberry now expects just a GBP79 million currency hit to annual revenue, having previously forecast GBP100 million. Adjusted operating profit is to take a GBP27 million hit, with Burberry lowering its forecast from GBP40 million.
During the third quarter, comparable store sales in the crucial Asia Pacific market were flat compared to pre-pandemic times. The unit includes mainland China, South Korea and Japan.
"Japan and South Asia Pacific improved quarter-on-quarter as Covid-19 related restrictions eased; however performance remains soft due to limited tourist traffic," Burberry said.
In the Americas, comparable store sales were 8% higher than pre-virus levels, while in Europe, the Middle East, India, and Africa, they were 17% lower.
On the EMEIA region, the retailer said: "We are very encouraged by the performance given the ongoing drag from the lack of tourists, which accounted for around 40% of pre-pandemic revenues in the region."
Until tourists return, Burberry's performance will continue to be held back, said Hargreaves Lansdown.
"A catalyst for recovery here would be a reduction in testing and isolation requirements for long-haul holidaymakers. The sales gap isn't as severe as it once was, though, suggesting Burberry's strategy to focus on full-price sales is paying off," said Hargreaves Lansdown's Sophie Lund-Yates.
interactive investor highlighted Burberry's move to full-price sales, boosting its status as a luxury name as well as its bottom line.
"Burberry's change of tack is improving its fortunes, even though a general lack of tourists is still punching a hole through revenues," said interative investor head of markets Richard Hunter.
Another strategy analysts praised was Burberry's targeting of younger audiences.
During the period, which included the crucial run-up to Christmas, the London-based firm said it succeeded in attracting younger shoppers. AJ Bell's Russ Mould said such a move is "absolutely critical" to ensure future success.
Burberry is preparing to welcome its new chief executive, Jonathan Akeroyd, in April, as Marco Gobbetti departs to join Italian rival Salvatore Ferragamo Spa. Akeroyd is joining from Gianni Versace. He previously led British luxury brand Alexander McQueen.
"Akeroyd will want to put his own stamp on the business, but he may want to consider an 'if it ain't broke don't fix it' approach given the strategic progress under Gobbetti. Retaining the services of Tisci is likely to be a priority as will be the continued development of its online proposition," Mould said.
By Lucy Heming;Â [email protected]
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