Burberry, the renowned luxury fashion brand, has faced a decline in its retail sales for the third quarter, primarily due to the ongoing repercussions of the Covid-19 pandemic. While Europe and the Americas continue to struggle, the company remains optimistic as it experiences strong performance in key markets such as China and Korea, as well as in leather goods, outerwear, and full-price sales.

During the 13-week period leading up to December 26, Burberry’s retail revenue decreased by 4% to £688 million, and comparable sales fell by 9%, erasing the 3% growth achieved in the previous year. Despite these challenges, CEO Marco Gobbetti emphasized the positive aspects of the business. He noted a significant increase in full-price sales, indicating that the brand’s collections and communication resonated well with both existing and new, younger customers. Gobbetti also mentioned that the company’s localized plans and digital capabilities played a crucial role in driving growth in recovering markets, and the successful implementation of the planned reduction in markdowns.

Although the Covid-19 pandemic resulted in store closures, Burberry saw strong growth in full-price sales of leather goods and outerwear, with low double-digit percentage increases. The company also experienced remarkable growth in digital full-price sales, which increased by over 50%, particularly in Mainland China where the growth was in triple digits. Asia Pacific comparable sales rose by 11%, primarily driven by Mainland China and Korea. However, EMEIA (Europe, Middle East, India, and Africa) faced a 37% decline due to the absence of tourists and temporary store closures. The Americas also saw an 8% decline, as the increase in full-price sales was offset by planned markdown reductions.

Looking ahead, Burberry anticipates making continued progress on its strategic objectives in the fourth quarter, expecting benefits to gross margins from changes in full-price, regional, and channel mix. However, the company acknowledges that challenges from the ongoing pandemic persist, and regional disruptions may affect trading in the current quarter. With 15% of its stores currently closed and 36% operating on reduced hours, Burberry remains cautious but confident in its ability to accelerate growth once the pandemic subsides.

While some may argue that focusing on full-price sales performance disregards the impact of discounts on overall sales, Burberry believes that the planned reduction in markdowns distorted the comparable sales figures. Therefore, full-price sales present a more accurate depiction of the company’s current position. Despite store closures and reduced operating hours, Burberry achieved high single-digit sales growth in the third quarter. Full-price sales were particularly robust in rebounding markets like the Americas, Mainland China, and Korea, where the company’s efforts translated into double-digit growth.

In response to the challenges posed by the pandemic, Burberry increased its digital initiatives, implementing strategies such as digital pop-ups and local activations on its webstore. These efforts contributed to the significant growth in digital full-price sales. The company also launched a marketing campaign featuring Marcus Rashford, a footballer who has become an advocate for child poverty, which received an exceptional response from consumers.

Looking forward, Burberry anticipates only a modest increase in border trade compliance costs and some additional duty due to the rules of origin imposed by Brexit. However, the company expresses greater concern about the changes in the UK’s VAT refund policies for luxury goods purchased by tourists. While the impact is expected to be minimal this year due to the low flow of tourists, Burberry believes that sales may shift between countries once travel resumes, with some tourists opting to shop elsewhere instead of in the UK.

Useful links:
1. Burberry Official Website
2. BBC News (for general information related to the topic)