Burberry follows Gucci-owner Kering on downward sales trend as consumers snub mid-market luxury fashion
Burberry Group Plc warned of a challenging first half after the British maker of trench coats reported tumbling sales on weak demand in China and the US.
Comparable store sales in the quarter ended in March fell 12% from a year earlier, Burberry said in a statement Wednesday, in line with the expectations of analysts. The company also warned that wholesale revenue will fall by about 25% in the first half of its fiscal year, which began last month.
The British label has been pursuing a turnaround that’s taking time to bear fruit as demand cools for high-end goods. The Asia Pacific and Americas regions performed the worst for Burberry last quarter, with sales sliding by 17% and 12%, respectively.
The brand’s creative director, Daniel Lee, has tried to go back to Burberry’s British roots by highlighting the label’s famous check pattern in products such as its rocking horse bags, which can sell for £1,890 ($2,372) in London. But last year, some analysts said Burberry’s price points were too high for the targeted customers.
“Burberry is finding it tough to execute its brand development plan against a backdrop of moderating consumer demand,” Luca Solca, an analyst at Bernstein, wrote in a note Wednesday.
The shares fell as much as 4.2% in early London trading. They’ve dropped by more than half in the past 12 months.
Burberry joins Gucci owner Kering SA in suffering from a challenging environment for brands that are positioned in the middle of the luxury market. The French group warned last month that recurring operating income in the first half would drop by as much as 45%.
Burberry has also faced a management setback after Chief Financial Officer Kate Ferry took a leave of absence last week following unscheduled surgery.
