Luxury spending was booming during the COVID-19 pandemic, but the trend has since reversed. One of Europe’s fastest-growing sectors is seeing sales fall, one major brand after another – and British brand Burberry is the latest.
The company said on Thursday that it may fail to meet its sales target for the current fiscal year due to demand for premium products. In six months to the end of September, Burberry recorded sales growth of 4%, to £1.4 billion (about $1.7 billion). However, the coat maker’s operating profit plunged 15% over the same period. Store sales declined sharply in the Americas region, while they remained strong in the Asia-Pacific region.
Given the slowdown in its business, Burberry noted that it was “unlikely to meet” its previous full-year earnings forecast and that its operating profit would be in the mid-range. lower than the target range.
“The slowdown in global demand for luxury goods is impacting current trade. If weaker demand persists, it is unlikely that we will be able to achieve our previously stated revenue guidance for FY24,” the company said in its statement. publication of results.
Burberry shares fell more than 9% on Thursday at 11 a.m. GMT following the announcement.
The luxury brand’s CEO, Jonathan Akeroyd, highlighted inflation and the high cost of living as reasons why shoppers are cutting back on spending, according to THE Financial Times.
“This difficult macroeconomic environment is found in all regions. I think it’s something quite unique because historically you get weakness in one region, you might find it in another,” Akeroyd said on a press call.
Burberry’s lackluster sales follow a slew of luxury brands seeing sales fall or slow in recent months as macroeconomic volatility weighs heavily on shoppers. Its European rivals, including French giants LVMH and Kering, have observed sales disappoint for the last quarter, highlighting weak spending by wealthy buyers.
It’s not just clothes or bags that people are buying less…high end watch brands like Richemont’s Cartier also suffered a major blow in the last quarter.
“Traditionally, wealthy customers who buy expensive clothing and accessories are seen as insulated from the impact of rising borrowing costs and rising prices, but apparently they are feeling some of the pain,” said Russ Mould, AJ Bell’s chief investment officer, according to the FT.
As the luxury crisis intensifies, only a few players have escaped unscathed so far, such as Birkin bag maker Hermès.
The “Britishness” of Burberry
The brand’s iconic ‘Burberry Check’, which it has used to design bags, coats and more, has been its signature print since the From the 1960s. When Akeroyd became CEO last year, the group’s strategy was to channel its activities “Britishness” as a way to grow its business and ultimately reach a turnover of £5 billion. Burberry has hired British designer Daniel Lee, who recently unveiled his first collection for the brand, as part of its strategy.
The company has had its share of obstacles beyond slowing global sales. Burberry chairman Gerry Murphy has criticized Prime Minister Rishi Sunak for making Britain the “least attractive” destination for shopping in Europe, following Sunak’s cancellation. VAT refunds for tourists.
But that hasn’t allowed Burberry to look away from its broader target. Akeroyd said that even amid macroeconomic uncertainty, he remained confident about the path forward for Burberry.
“We have made good progress against our strategic objectives, executing on our priorities at a sustained pace,” he said in a statement. “Although the macroeconomic environment has become more challenging in recent times, we are confident in our strategy to realize our potential as a modern British luxury brand, and we remain committed to achieving our medium and long-term objectives. »
Burberry did not immediately return Fortunerequest for comment.