Burberry sales fall 35% in China on back of Covid lockdowns

theguardian.com:

Burberry has reported sales growth of only 1% in its latest financial quarter because of the impact of Covid-19 lockdowns in China, while sales were boosted elsewhere by its Lola handbag range and signature trenchcoat.

The luxury fashion retailer said sales fell 35% in mainland China because of restrictions and store closures to contain the latest outbreak of the coronavirus, while sales grew 16% across the rest of the world in the 13 weeks to 2 July.

The company reported the strongest growth in Europe, Middle East, India and Africa (EMEIA), with sales up 47% year on year with spending levels back above pre-pandemic levels, as sales to American tourists also bounced back strongly. The company said sales to Asian tourists, especially Chinese, remained weak.

Sales of leather goods, led by its Lola handbag range, grew by 21% outside mainland China, while outerwear, driven by rainwear and jackets, grew by 19%.

Burberry warned of uncertainty regarding the economic outlook in the short-term and said that the company was “actively managing” the impact of soaring inflation, which in the UK has hit a 40-year high of 9.1% and is heading higher.

Overall, the company reported a 1% year-on-year increase in comparable store sales to £500m.

Shares fell 5% in early trading on Friday, making Burberry the biggest faller on the FTSE 100.

“In theory, luxury goods retailers should be bombproof from inflationary and even recessionary environments, with the profile of the consumer at the top end being insulated from the economic constraints of many others,” said Richard Hunter, head of markets at Interactive Investor. “However, the closure of shop windows in key regions and the lack of a full return of the Asian tourist still remain headwinds.”

Burber