Burberry Impacted by China Lockdowns, but Demand Elsewhere Remains Resilient

  • Burberry reports a Q1 trading update
  • The company was impacted by lockdowns in China
  • Shares have fallen over 3%

Burberry reported a first-quarter trading update before the open Friday stating the company’s performance “continued to be impacted by lockdowns in Mainland China.”

As a result, the company’s shares tumbled over 3% in the early part of the session.

Even so, the luxury fashion brand still expects to target high-single-digit revenue growth and 20% margins in the medium term. It also expects a £90m adjusted operating profit in FY23, despite the current macro-economic environment creating some “near-term uncertainty.”

The company previously forecast an adjusted profit of £92 million.

Despite soaring inflation and supply chain issues, luxury fashion demand has remained resilient so far this year, with several brands reporting solid numbers.

Burberry’s first quarter comparable store sales increased by 1%, impacted by lockdowns in Mainland China. However, excluding Mainland China, comparable store sales grew 16%.

“Our performance in the quarter continued to be impacted by lockdowns in Mainland China but I was pleased to see our more localised approach drive recovery in EMEIA, where spending by local clients was above pre-pandemic levels,” said Jonathan Akeroyd, Chief Executive Officer of Burberry. “While the current macro-economic environment creates some near-term uncertainty, we are confident we can build on our platform for growth.”

Consumer Demand:

Based on website traffic data, Burberry demand looks to be solid and has continued to climb despite surging inflation. However, this is probably down to the online shift as a result of the pandemic, despite the rise pre-pandemic as well.

The brand has a large presence in Asia, especially China, and persistent lockdowns in the country will have seen a continued shift to online purchases.