Burberry, the luxury fashion brand, is slowly recovering from the negative impact of the COVID-19 pandemic on its sales. The company reported a significant decrease of 45% in comparable sales and 48% in total retail revenue during the first quarter of the year, totaling £257 million. Despite this, Burberry saw a double-digit growth in online full-price sales during the same period.

The pandemic has severely affected the luxury market, leading to a decrease in demand. Burberry expects that it will take time to return to pre-crisis levels, especially with the slow resumption of overseas travel.

In terms of regional performance, Asia Pacific experienced a 10% decline overall in the first quarter. However, June brought growth, particularly in Mainland China, where sales increased by mid-teens. The EMEIA region, which covers Europe, the Middle East, India, and Africa, saw a decline of approximately 75% due to lockdown measures and the absence of tourists. Sales improved in June, but the continued impact of reduced tourist flows affected results. The Americas also declined by 70%, but trends improved significantly in June. By the end of June, all regions saw a less pronounced sales drop, with a decline of only 20% in comparable sales.

Burberry received a positive response to new product launches in recovering economies and through online channels. The brand saw strong demand for leather goods in Mainland China and Korea, attracting new and younger customers. Growth in these markets exceeded pre-COVID-19 levels last month, albeit with some benefit from repatriated sales due to travel restrictions.

As part of its transformation program, Burberry plans to sharpen its focus on product and make organizational changes to increase agility and generate cost savings. It has created three new business units for Ready-to-Wear, Accessories, and Shoes, pooling expertise within each unit to enhance product focus and quality. Additionally, Burberry is proposing to streamline its office-based functions and improve retail efficiency in certain regions outside the UK. These changes include rationalizing office space, which is expected to deliver significant savings.

Unfortunately, due to the impact of the pandemic and transformation efforts, Burberry anticipates cutting approximately 500 jobs, with 150 positions at its UK headquarters. The company aims to protect manufacturing plants and stores globally, but the status of its Hong Kong stores remains under review. Throughout the pandemic, Burberry did not furlough any of its approximately 10,000 employees.

Looking ahead, Burberry is focused on rebounding economies and growth opportunities. It aims to drive strong double-digit full-price growth in leather goods in Mainland China and Korea. The company is also prioritizing innovative marketing initiatives, including recent campaigns featuring Kendall Jenner and a new digital game called B-Surf. These efforts have resulted in significantly higher reach and engagement compared to previous campaigns.

Burberry’s commitment to a local approach in its campaigns is evident, as seen in its successful accessories campaign in China. This campaign utilized augmented reality, influencers, and sustainable pop-up stores, leading to sold-out products within minutes and weeks of launch. The company plans to continue implementing similar campaigns in the future.

Innovation remains a priority for Burberry, and it will open a social retail store in Shenzhen this summer in partnership with Tencent. This store aims to provide unique experiences that integrate customers’ social and online lives with their physical environments.

However, Burberry’s overall performance in the second half of the year is heavily dependent on external factors beyond its control. The company expects the second quarter, the three months ending in September, to continue being significantly impacted by the pandemic. Retail sales are likely to be affected by reduced tourist flows and ongoing challenges such as store closures and reduced trading hours. Burberry predicts a decline of 15% to 20% in comparable sales for the second quarter. In the wholesale sector, the company is collaborating with partners to protect the brand but expects sales to decline by around 40% to 50% in the first half of the year.

Despite the challenges, Burberry remains optimistic about its future growth potential. The company continues to adapt its strategies to navigate the current environment and capitalize on emerging opportunities in the luxury market.

[Useful links:
1. Burberry website – https://www.burberryplc.com/
2. Report on Burberry’s Q1 update – https://www.burberryplc.com/content/dam/burberry/corp-assets/covid_19/q1-2021-trading-statement.pdf]