Burberry forecast higher profits after attracting young shoppers with puffer jackets and trainers under designer Riccardo Tisci and benefiting from a rebound in the luxury goods market as lockdowns unfold across the world.
Fellow luxury brands Richemont and Prada also showed strong trading as affluent consumers splashed out on designer bags, watches and clothes after being unable to spend money on holidays and nights out due to restrictions of Covid-19.
“As we emerge from the pandemic and people start to socialize and travel more, it seems the wealthy are lapping up luxury items, with Burberry being the latest name in this space to report strong trade,” said Russ Mould. , Chief Investment Officer at AJ Bell.
Burberry said full-price sales rose 26% from pre-pandemic levels in the three months to December 25 after growing 10% in the previous quarter as it sold more items at full price, including sneakers, raincoats and Burberry bags.
The British luxury brand said it now expects to increase full-year profit by 35% year on year to between £500m and £515m, against City analysts’ previous forecast of just over of £470 million.
The positive update came after Richemont, which owns brands such as Cartier and Piaget, said sales were up 35%. This included a 41% increase in jewelry sales, a 29% increase in watches and a 40% increase in fashion and accessories, led by Chloé and Montblanc. Growth was strongest in the Middle East, followed by the Americas and Asia.
Prada said its sales were up 41% year-over-year and it saw a “significant increase” in underlying profit as customers returned to physical stores.
Burberry attributes the strong profit growth to its designer Tisci’s products attracting young shoppers.
Sales in Asia were up 22% from the same quarter two years ago, up 5% from the previous three months, amid strong sales of coats, puffer jackets and different versions of its bag Lola. In Europe, sales were down 4% from two years ago, with low tourist numbers which accounted for 40% of Burberry’s sales before the pandemic.
But the drop was a dramatic improvement from the previous quarter’s 27% plunge, as chief operating officer Julie Brown said Burberry’s new image was proving attractive to more local shoppers.
Sales in the United States and Canada also continued to rise strongly, as Brown said puffer jackets, a quilted coat and plaid casual shoes from Burberry helped attract more male shoppers.
Brown said Burberry is seeing inflation, particularly on shipping and trucking costs, but she said the company is working hard not to pass those costs on to its buyers. “We will keep the situation under review and look for efficiencies in our cost base first,” she said.
Gerry Murphy, Chairman of Burberry, said: “Despite the continued challenges of the external environment, we are confident that we will end the year strong and provide an excellent platform on which to build when our new Chief Executive, Jonathan Akeroyd , will join us in April.”
Burberry is changing direction, having poached Versace’s Akeroyd to take over as chief executive from Marco Gobbetti, who was midway through a turnaround plan to upscale Burberry, with price in line with its French and Italian rivals. . Gobbetti will step down at the end of the year, after saying he wanted to return home to Italy.
Gobbetti brought Tisci to Burberry in 2018, having previously hired him at luxury brand Givenchy.