London losing out to Paris and Milan over tourist shopping

17-07-23

• British brand’s sales jump by 18% year on year on back of post-Covid bounceback in China

Burberry has reported a sales surge of almost a fifth thanks to a bounceback in China, but the luxury British fashion brand has warned that London is losing out to rivals such as Paris and Milan, which are enjoying a stronger tourist shopping boom.

The brand, best known for its signature check bags and raincoats, said that global sales grew 18% year on year to £589m in the quarter to 1 July – its fastest growth rate in two years.

The company pointed to a strong sales recovery in mainland China, which suffered from Covid-19 related lockdowns last year, where sales rose 46% year on year. However, the US was a weak spot, with the Americas region reporting a sales decline of 8% year on year in the quarter.

The luxury fashion retailer, which this week kicked off its “best of Great Britain” campaign as it gears up for the September launch of its autumn/winter collection, said that outerwear and leather goods proved a hit with shoppers.

Sales of outerwear, led by the 167-year-old brand’s classic heritage rainwear, soared 36%, with vintage Burberry check and Frances shapes handbags also selling well. The company also said that leather goods sales rose by 13% year on year.

However, the company, which said that tourist growth across Europe rose 53% year on year, said that the UK government’s decision to stop allowing tourists to reclaim VAT on shopping purchases was hurting Britain’s status as a holiday shopping destination.

“London has strength but we are definitely seeing a stronger recovery of [shopping] in continental tourists compared to the UK,” said Ian Brimicombe, the interim chief financial officer at Burberry. “At the moment we are seeing Britons going to Europe and other nationalities going to continental Europe for their buying as opposed to London.”

Brimicombe said the UK needed a new scheme because European rivals offered various incentives to shoppers.

“Being a home British brand we would love to attract [more] tourists [shopping] here,” he said. “It is not really a level playing field at the moment. We need to even up the competition with continental Europe.”

He said that tourists had not been put off shopping in Paris despite the recent riots and unrest in France.

Sales across Europe, the Middle East, India and Africa rose 17% in the first quarter.

Burberry also enjoyed a strong performance across Asia Pacific. Sales in southern Asia rose 39%, with Japan up 44%.

“The luxury market continues to thrive unabated as more well-heeled shoppers continue to purchase items consistently, with the demand levels this provides helping to maintain the market,” said John Coldham, a retail partner at the law firm Gowling WLG.

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Burberry has been implementing a return to the “Britishness” of the brand’s roots in a refocus under its chief executive, Jonathan Akeroyd, 56, who started last April. The Briton joined from Versace, which he had run since 2016.

“Encouragingly, it isn’t just China driving the growth,” said Charlie Huggins of the investment service Wealth Club. “This suggests Burberry has seen a good early response to brand elevation efforts and new designs.”

However, trading in the US continues to be tough, with the Americas region reporting a sales decline of 8% year on year in the quarter.

In September, the Bradford-born designer Daniel Lee’s first runway collection, which debuted at London fashion week in February, will be available in-store. Lee joined in October last year, replacing the creative head Riccardo Tisci, who left just a year after his fellow Italian Marco Gobbetti’s departure as chief executive.

“Burberry is likely to face a big test of its luxury credentials in the coming months,” said Danni Hewson, head of financial analysis at AJ Bell. “When economic times are tough, sales of true luxury goods are often relatively unaffected, as the wealthy clientele who buy them are insulated from the worst of the impact.

“Does Burberry have the necessary cachet? The reception given to the work of Burberry’s new design chief Lee will be important for the business.”

Author: Mark Sweney. The Guardina