LONDON — COVID-19 disruption in China took a bite out of Burberry’s growth in the key holiday trading period, with third-quarter retail revenue flat at constant exchange, and up 5 percent at reported rates.
Retail revenue was 756 million pounds in the 13 weeks ended Dec. 31, compared with 723 million pounds in the corresponding period last year. Comparable store sales were up 1 percent, compared with 7 percent in the corresponding period last year.
In mainland China, one of Burberry’s biggest markets, sales were down 23 percent due to lockdowns and the country’s later decision to relax COVID-19 regulations during the period.
Outside mainland China, comparable stores sales advanced 11 percent with the EMEIA region, Japan, South Korea and South Asia-Pacific all notching double-digit growth.
EMEIA, which covers Europe, the Middle East, India and Africa, grew 19 percent, driven by sales to tourists. Sales to EMEIA nationals grew low-single digit in the period, Burberry said.
Sales in the Americas region fell 1 percent, which Burberry described as “a slightly improved performance” over the first two quarters. Burberry noted that Americans opted instead to spend their dollars in the EMEIA region during the holiday period.
Burberry said accessories grew in the double-digits outside of mainland China, driven by a dedicated campaign and a program of commercial activations for the festive period.
In a report on Wednesday, RBC Capital Markets said Burberry’s retail revenue growth was 5 percent below consensus estimates, but the market “is likely to view the miss as transitory, with the prospect to improve in 2023.”
China has since relaxed more restrictions and opened its borders to travelers.
“Overall, we are pleased with our performance in the third quarter as double-digit revenue growth outside of mainland China offset the impact of COVID-19-related disruption there,” said Burberry’s CEO Jonathan Akeroyd.
“We remain confident in our ability to reach our medium-term targets, despite the current macroeconomic environment. We are focused on executing our plan to realize Burberry’s potential as the modern British luxury brand, and we look forward to unveiling Daniel Lee’s debut collection for Burberry on our return to London Fashion Week next month.”
The company said its full-year outlook remains unchanged and it continues to target “high-single-digit” revenue growth “with operating leverage ensuring good margin progression, notwithstanding the current macro environment.”
It is expecting to see a currency tailwind of around 160 million pounds on revenue and 70 million pounds on adjusted operating profit in fiscal 2022-23.
As reported in November, Burberry’s first-half revenue rose 11 percent to 1.35 billion pounds at reported exchange, boosted by the weaker British currency. The pound has since strengthened following the arrival of Rishi Sunak as prime minister, and Jeremy Hunt as chancellor of the exchequer.
At constant exchange rates, revenue rose 5 percent year-on-year in the first half.