15th Jul 2022 08:41
(Alliance News) - Burberry Group PLC shares dropped on Friday morning after the retailer reported that continued Covid disruption in China offset comparable store sales growth in its first quarter.
Shares were trading 4.0% lower at 1,583.00 pence each on Friday morning in London.
The London-based luxury fashion retailer reported retail revenue of GBP505 million in its first quarter that ended July 2. This reflects an increase of 5.4% from GBP479 million in the comparable period a year before.
Comparable store sales grew 1% in the quarter versus a year before.
Burberry said that this was achieved despite "significant disruption" due to Covid lockdowns in mainland China.
There was a 35% reduction in comparable store sales within China, due to restrictions and store closures to control Covid-19 outbreaks. Excluding mainland China, comparable store sales were up 16%.
"Our performance in the quarter continued to be impacted by lockdowns in Mainland China but I was pleased to see our more localised approach drive recovery in Europe, the Middle East, India & Africa," Chief Executive Jonathan Akeroyd said.
The company recorded its strongest geographical growth in Europe, the Middle East, India & Africa. Comparable store sales grew 47% in the region.
The more localised approach led to an increase in spending by clients in their home markets to above pre-pandemic levels, it explained.
Further, Burberry's product launches and seasonal collections performed well. For leather goods specifically, comparable sales rose 21% outside of China, supported by its Lola handbag range. Outerwear comparable sales increased 19% outside of China, driven by rainwear and jackets, Burberry said.
Burberry backed its outlook and continues to target high-single-digit revenue growth and 20% margins in the medium term.
"While the current macro-economic environment creates some near-term uncertainty, our performance in Mainland China has been encouraging since our stores reopened in June and we are actively managing the headwind from inflation," it said.
For the current financial year, the company expects a currency tailwind of GBP190 million to revenue and GBP90 million to adjusted operating profit.
In financial 2022, Burberry generated revenue of GBP2.83 billion and adjusted operating profit of GBP523 million.
By Abby Amoakuh; [email protected]
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