Burberry – global slowdown in demand for luxury goods hurts progress
- Burberry says global slowdown in luxury is hurting demand, ability to reach full year revenue guidance being called into question
- Outerwear and Leather goods up 21% and 8% in the first half
- Q2 saw all regional growth slow, Americas the weakest performers
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown:
“The shine is dimming on the luxury sector as even higher end consumers tighten their belts. Heralded as a more resilient corner of the economy, suggestions of missing targets and lower-end profits aren’t what investors have come to expect and that has consequences for valuations. Specifically for Burberry, it doesn’t have a basket of other brands or products to help diversify risk in this scenario. The work the group’s done to become a more premium luxury house is to be commended and will improve strength in the long-term, but there’s no getting away from the fact that particularly aspirational, younger shoppers are thinking twice before swiping their cards. There could be further pressure to come before things improve, especially if a broader pull back in spending comes through in 2024 after the glut of festive trading.
The UK’s decision to halt VAT refunds is denting demand in the important UK market. The scheme was an important pull to encourage tourist spending and this revenue-cow now has no more to give. The wider European region is seeing an increase in tourist spending overall which is the shift Burberry wanted to see – American and Asian tourists splashing the cash while taking in Europe’s sights is a cornerstone of the business model.
Burberry has done pretty much all it can to place itself in a better position, both operationally and creatively. The issue is that while it’s a slicker and bolder beast, Burberry is currently residing in a hostile environment outside of its control.”