Burberry's muted Q3 hit by China woes, but it "over-indexed" in soft accessories

Burberry’s Q3 update on Wednesday showed a slowdown in sales growth as — like luxury peer Richemont on the same day — it reported a big impact from Covid in China.

But it said that “overall” it was “pleased with our performance in the third quarter as double-digit revenue growth outside of Mainland China offset the impact of Covid-19-related disruption there”.

Europe in particular continued to perform well, driven by strong festive season trading, and leather goods delivered another quarter of double-digit growth globally.

The company is in that strange in-between phase at the moment with much of the product it sells having been developed under its previous creative director, Riccardo Tisci. Flagship seasonal product reflecting the vision of new creative chief Daniel Lee won’t be shown on the catwalk until next month.

That said, the numbers show the company is still selling plenty of it, whether it was designed by Tisci or Lee.

The company said Retail revenue rose 5% to £756 million in the three months to the end of 2022, although it was flat at constant exchange rates (CER).

Q3 comparable store sales increased 1% overall, dented by Covid in Mainland China, but excluding that key market, comparable store sales grew 11%.

EMEIA comps rose a healthy 19%, the Americas region was down 1%, APAC was down 7% (although Japan, South Korea and South Asia Pacific all saw double-digit growth) and Mainland China down 23%.

Despite the lacklustre overall figures, Burberry said that a strong programme of brand activations supported by pop-ups and social media, drove customer engagement in the period, including outerwear, Festive and Lunar New Year campaigns.

ACCESSORIES STRENGTH

And it had some clear wins during Q3. Accessories continued to perform well with the aforementioned double-digit comparable growth in leather goods. The Lola handbag range continued to see strong growth, supported by new styles, including the Vintage Check Bouclé, with the Frances bag and Giant Check also performing well.

Men's accessories comps grew in strong double-digits with bags increasing over 25%. And soft accessories “over-indexed during this key time for the category", with the Archive Beige Check cashmere scarf driving around 60% of sales for the category.

Women's ready-to-wear comparable sales increased in the mid-teens, supported by dresses and knitwear featured in its seasonal campaigns. And outerwear comp sales grew by high single-digits outside of Mainland China.

Despite the Covid issue in China, Burberry said its near and medium-term targets “remain unchanged as we continue to target high single-digit revenue growth with operating leverage ensuring good margin progression, notwithstanding the current macro environment”.

Its confidence is buoyed by the rollout of the new store concept that has continued with 15 stores completed in the quarter. It has 84 stores in the new concept in total and is on track to complete 65 stores in FY23. “Financials of the new stores continue to show higher AUR and productivity,” it said.

Burberry's muted Q3 hit by China woes, but it "over-indexed" in soft accessories

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