Shares in luxury goods retailer Burberry (BRBY) were marked down 8% to £18.12 on the news sales are down on pre-pandemic levels in the EMEIA (Europe, Middle East, India and Africa) region, with ongoing travel restrictions limiting the tourist flows that are so important to its business.

The tourist shortfall overshadowed otherwise positive first half results from the trenchcoats-to-cashmere scarves seller, which reinstated the interim dividend after reporting a jump in pre-tax profits as overall sales returned to pre-Covid levels and margins expanded.

For the half ended 25 September 2021, Burberry’s pre-tax profit increased to £191 million from £73 million year-on-year as revenue increased 38% to £1.21 billion, while gross margin increased by 120 basis points to 69.3% thanks to a higher full price sales mix.


However, the leather goods, jackets and shoes seller said that while the Americas, Mainland China and South Korea delivered strong double-digit growth versus two years ago, other regions were under pressure from reduced tourist levels.

Trading ‘remains more challenging’ versus the pre-Covid period in the EMEIA region due to limited tourist flows.

Historically Burberry has been heavily reliant, particularly in terms of European sales, on Asian tourists buying items as part of their trip, whether that be in airport concessions or stores in popular destinations.

With travel still restricted and some consumers reluctant to jet off on holiday, this part of Burberry’s business is struggling.

Encouragingly, Burberry is seeing an acceleration in performance in countries less impacted by travel restrictions, so it confirmed it is comfortable with current year market expectations and maintained its medium term guidance for high single-digit top line growth and ‘meaningful margin accretion’.


AJ Bell investment director Russ Mould said Burberry’s weak performance in the EMEIA regions is ‘detracting from an otherwise robust contribution from Asia Pacific and the Americas in particular - even if growth on the same period two years ago slowed in the second quarter for the group as a whole.

‘Burberry was a canary in the coalmine for the wider market at the start of the pandemic given its significant exposure to China and, while the situation isn’t as bad as in 2020, the company’s business in the country has been affected by the recent resurgence in Covid-19 and weakening economic growth.

‘Shareholders will hope these are short-term issues and there were more encouraging signs around the medium-term prospects for Burberry as digital sales’ contribution to the mix continues to build.

‘Departing CEO Marco Gobbetti is handing over the business in better shape than he found it as he prepares to give way to his successor, Versace alumni Jonathan Akeroyd, next spring.’


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Issue Date: 11 Nov 2021