- Luxury brand sets bold £5 billion sales target
- Near-term guidance reaffirmed
- Reopening of Chinese economy a boon
Shares in luxury goods group Burberry (BRBY) edged up 0.6% to £20.15 as new chief executive Jonathan Akeroyd outlined an ambitious target to grow annual sales to £5 billion as the high-end handbags-to-trench coats seller refocuses on ‘Britishness’ under new designer Daniel Lee.
The FTSE 100 fashion house also maintained its full year outlook after strutting in with robust figures for the six months ended 1 October 2022.
Burberry reported a 6% rise in adjusted operating profit to £238 million on sales up 5% to the best part of £1.35 billion, both at constant currency.
£5 BILLION REVENUE AMBITION
New boss Akeroyd is ‘excited about what we can achieve in pursuit of our long-term ambition to reach £5 billion in revenue’.
That looks a stretch given last year’s sales came in at £2.8 billion, yet the Burberry chief thinks it can be achieved by doubling sales of leather goods, shoes and women’s ready to wear products and doubling online sales in the medium term.
He also stressed that Burberry has ‘an extraordinary legacy, a unique British heritage and a very strong platform to build on. Our focus in this next phase is on growth and acceleration. We have a clear plan to achieve this across brand, product and distribution and a very talented designer in Daniel Lee.’
SALES GROWTH ACCELERATES
Burberry’s retail like-for-like sales rose 5% in the half, with growth accelerating from 1% in the first quarter to 11% in the second quarter as new product launches and seasonal collections performed strongly and the retailer saw positive momentum in handbags.
Growth was hindered by lockdowns in China, where like-for-like store sales slumped 19%, but the gradual reopening of the Chinese economy is helping Burberry and shareholders will be keeping a close eye on the latest missives from Beijing on Covid given how important that market is to the company.
Performance outside of the Chinese mainland was robust with EMEIA (Europe, Middle East, India and Africa) like-for-like store sales up 34% in the half, bouncing back strongly from lockdowns with the region benefiting from strong tourist growth.
While Burberry maintained its near-term guidance to full year 2024, the retailer is ‘mindful of the challenging macro environment and its potential impact on trading, particularly Covid-19 related disruption in Mainland China and recessionary risks in Europe and the Americas.’
EXPERT VIEWS
Julie Palmer, partner at Begbies Traynor (BEG:AIM), said Burberry ‘impressed and went beyond expectations with its interim results’, which showed the unique British heritage brand is ‘far from out of fashion’.
Yet she warned Akeroyd had ‘a tough task on his hands turning around Burberry, which has not enjoyed the same success as more luxurious rivals such as LVMH (MC:EPA). But with Daniel Lee recently joining as chief designer, the duo could provide the flair and focus to get Burberry back on trend.’
AJ Bell investment director Russ Mould said ‘a plan to focus on the inherent Britishness of Burberry isn’t necessarily about parochialism but more about making sure the brand remains distinctive, with British designer Daniel Lee set to replace the previous Italian creative director Riccardo Tisci.
‘The downturn in the global economy will also be an acid test of Burberry’s luxury credentials, as the clientele it serves should be less exposed to the pain associated with a recession.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Ian Conway) own shares in AJ Bell.
