Jan 18, 2017
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Burberry upbeat after Q3 - UK, France, China strengthen, but US stays weak

Jan 18, 2017

Burberry was upbeat Wednesday morning as it delivered a Q3 trading report that showed a recovery is definitely under way.

The company, which had suffered from the luxury downturn along with a raft of its high-end peers, had a good quarter whichever way you look at it, even if the weakness of the pound was the key factor in its sales surge and some markets are still tough.

Burberry winter 2016-17 - Spring-Summer2017 - Womenswear - Londres - © PixelFormula

So, to the numbers: Retail sales were up an underlying 4% to £735m in the three months to December 31, but with currency effects added in, they powered ahead by 22%. And, importantly, comparable sales rose 3%.

What went right this time? Well, by product, fashion again outperformed replenishment and led growth across all categories. Accessories outperformed too, led by strength in bags. And customers “responded positively” to the festive assortment, with good growth in small leathergoods. Importantly, the see-now-buy-now ‘September collection’ delivered “strong results following the exceptional response to the runway show.”

Growth was driven by newness across all categories with that particular strength in bags. The company has launched a number of new pieces in recent years from the Runway Rucksack to the Patchwork and Bridle bags and these have been boosting its sales even against a background of a tough market for luxury bags.


The strength appears to be (almost) global. Asia Pacific returned to growth with a low-single-digit comparable sales rise and there was an “acceleration in Mainland China with high-single-digit growth and improvement in Hong Kong”. But that Hong Kong improvement still meant comp sales fell, by a low-single-digit percentage, although positive conversion offset most of the firm’s footfall decline. 

The company saw double-digit percentage growth in EMEIA and “continued exceptional performance in the UK”. Its UK comp sales surged around 40% with growth from both travelling luxury customers from all regions and from domestic customers.

The UK performance was only to be expected due to the boost that the weak pound has given to luxury stores in Burberry’s domestic market, but increased business from domestic customers was good news.

Burberry winter 2016-17 - Spring-Summer2017 - Womenswear - Londres - © PixelFormula

And while the firm said continental Europe remained weak, France seeing an improvement compared to Q2 was good news too. That’s especially so given that market’s problems following terrorist attacks and the fact that being so close to the UK would have been expected to have dented some of its luxury tourist traffic.

Was there any bad news? Of course. It’s clear from the above that some markets still have a way to go before they can be said to be buoyant. In Q3 The Americas saw a low-single-digit percentage decline as the weak trend of the first half continued. Burberry said that inside the US, domestic and travelling luxury customer demand remained uneven.

But conversion improved and revenue from personal customer appointments and events grew “significantly”. Also on the upside, Burberry said that American customer spend globally is increasing.


The company also said that it made operational and strategic progress, in line with its plans announced back in May. That included boosting brand strength and this appears to be paying off as engagement with its festive campaign more than doubled to over 22m film views.

And when people buy from Burberry, they seem to be coming back for more. The company also said it increased mainline conversion globally and saw a double-digit uplift in spend from returning customers.

With its heavy focus on tech, it’s unsurprising that digital outperformed in Q3 with growth in all regions, supported by the launch of new payment methods. And it saw significant growth in mobile and in China, reflecting its strategic focus and investment. The redesigned global site is receiving positive Net Promoter Score (NPS) results and the enhanced local website in China delivered strong growth.

That’s all good news, especially in the week that its new chief operating officer arrives and the week before its future new CEO joins. For now, current CEO and ongoing creative head Christopher Bailey said of the last quarter: “With a record number of views of our festive film and strong demand for new products in our collections, this improvement reflects early progress from our plans to drive Burberry’s performance for the long term.  We continue to take action to position the business for growth over time and our plans to enhance efficiency are on track.”

The company added that it will continue to make cost savings this year and that fiscal 2017 pre-tax profit should be in line with current market expectations. While exchange rates are volatile, the weakness of the pound could benefit the profits figure by around £115m to £125m.

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