Retail sales in China rose 5% amid a 'challenging' luxury market, CEO says
By Andrea Figueras
Shares in Burberry climbed after the British group reported higher retail sales for its fiscal second quarter in a difficult market for most luxury peers.
The London-based group, best known for its trench coats, said that comparable store sales for the three months through Sept. 26 rose 4% on year. While decelerating from the 5% increase seen in the previous quarter, the result came ahead of analysts' estimates of 3% growth, according to a company-provided consensus.
Revenue for the first half came in at 1.1 billion pounds ($1.46 billion), up from 1.03 billion pounds a year before, while operating profit reached 54 million pounds, compared with an operating loss of 18 million pounds previously.
Analysts at Jefferies said that Burberry's solid figures reiterate progress in the group's recovery plan. Meanwhile, rivals in the luxury sector have reported slowing momentum, struggling to recapture consumers' interest for high-end goods after a lengthy period of falling demand.
The stock was up 9.1% at 1,192.50 pence in European morning trading.
"We are outperforming a challenging luxury market," Burberry Chief Executive Officer Joshua Schulman said during a call. The CEO noted that the company has seen five consecutive quarters of sales growth, which "demonstrate that our strategy is working."
Two years ago, Burberry unveiled a plan that aimed to revive the brand's appeal by returning to its classic British style, reduce costs and improve financial performance.
The company is building credibility in its ability to turn things around, Citi analysts said in a note.
The results come amid renewed concerns of weak luxury demand, after companies in the sector -- including bellwether LVMH -- reported soft trends for the third quarter, partly due to continued challenges in China.
Analysts at Bernstein argued that Burberry's performance in China seemed particularly reassuring, while RBC Capital Markets noted that some of the group's peers in the industry have struggled to meet consensus expectations.
Burberry's retail sales in China jumped 5% during the quarter, helped by local spending and intraregional tourism. The market in China is challenging right now, but the company is pleased with its performance there, the CEO said, adding that Chinese consumers remain very important for the group.
The company said it remains mindful of the uncertain environment, but still aims to deliver revenue growth and margin expansion in fiscal year 2027.