Burberry, a luxury fashion brand, has shown a strong recovery in its sales after a challenging first half of the year. In the six months leading up to September 26, the company experienced a significant decline in revenue of 31% to £878 million. Retail comparable sales also dropped by 25%. Adjusted operating profit fell by 75% to £51 million, with the adjusted operating profit margin decreasing from 15.9% to 5.8%. Despite these setbacks, Burberry was able to quickly adapt and continue making progress with its strategies amidst the disruptions caused by the Covid-19 pandemic.

The company witnessed a decline in comparable store sales of 45% in the first quarter and 6% in the second quarter, but it saw a return to growth in October. However, the current national lockdowns in Europe are likely impacting its trading. Around 10% of Burberry’s stores are currently closed due to restrictions, and approximately half of its sales in Europe usually come from tourists.

In terms of positive developments, Burberry experienced strong double-digit growth in Mainland China, Korea, and the US despite the sales drop in the second quarter. The brand received a positive response to its products, particularly seen in an increase in full-price channels. Leather goods, in particular, performed exceptionally well, surpassing the average retail comparables. Digital sales also saw significant growth.

Burberry’s decision to reduce markdowns indicates that it is resonating with new and younger consumers, although it may have a short-term negative impact on revenue. However, this strategy is expected to benefit the brand in the long run. The company remains focused on long-term growth and continues to implement its growth strategy despite the challenges posed by the pandemic.

To adapt to the current circumstances, Burberry has reoriented its business to capture opportunities in rebounding markets. September saw higher exit rates compared to June, and the company performed well in the Americas and Asia. Comparable store sales in the Americas increased by 21% in the second quarter, with the US outperforming the regional average. In Asia, comparable store sales grew by 10%, driven by strong growth in Mainland China and Korea. Mainland China, in particular, has seen double-digit sales growth in full-price channels since May.

Burberry has also put a focus on enhancing its digital presence and integrating online and offline operations. Initiatives such as gaming collaborations and digital pop-ups have been successful, and the company’s social retail store in Shenzhen Bay, in partnership with Tencent, has exceeded expectations. It has also introduced online-to-offline customer journeys, allowing consumers browsing the website to directly connect with sales associates in stores.

In terms of product categories, leather goods have seen exceptional performance, with the majority of full-price sales coming from bags. The launch of the new Olympia bag has gained strong momentum. Menswear also performed well, particularly in jersey wear and trousers. Womenswear saw positive performance in dresses and knitwear, although outerwear was impacted by lockdown measures.

Despite the challenges posed by the pandemic, Burberry remains optimistic about its recovery and the positive response to its brand and products. The company’s adaptability, focus on long-term growth, and integration of digital and offline operations position it well for continued success.

Links:
1. BBC: Burberry sees signs of growth after challenging first half
2. Reuters: Burberry sees signs of rebound as China sales grow