Burberry pins hopes on Chinese recovery
Covid chaos takes toll on UK brand and rival Richemont
THE world’s leading luxury brands are pinning their hopes on a Chinese resurgence after the country dropped its disastrous zero-Covid policy.
Burberry and Cartier owner Richemont have been hammered by on and off lockdowns in China – a key market for luxury firms.
Yesterday they said Christmas trading was hit by a surge in Covid infections that followed the easing of restrictions.
China abandoned its controversial zero-Covid strategy in December after the most widespread protests since the pro-democracy movement of 1989. But the reopening of shopping malls, markets, restaurants and other venues sparked a wave of infections.
Richemont, which also owns Van Cleef & Arpels and Net A Porter, said that meant it had to close stores or reduce hours. Its sales in China fell 24pc in the last three months of 2022, compared with a year earlier.
Its woes in China almost wiped out an otherwise bumper performance, as wealthy shoppers elsewhere continued snapping up luxury goods. Overall sales hit £4.7bn, up 5pc from a year earlier.
Burberry blamed ‘significant disruption’ from lockdowns and the reopening of China’s economy for a huge fall in sales there. The British firm, famed for its trenchcoats, saw Chinese sales crash 23pc in the last three months of 2022.
The disruption weighed on what new boss Jonathan Akeroyd described as an otherwise ‘ pleasing’ performance. Excluding China, Burberry sales jumped 11pc, driven by a strong European performance, where sales were up by around a fifth. It was helped by double- digit growth in its leather goods, such as the Lola handbag and the Frances bag.
Womenswear also grew by around 15pc, with bumper demand for dresses and knitwear, while coats and jacket sales jumped by almost a tenth outside China. Overall sales were up 5pc to £756m.
Burberry shares rose, 3.3pc, or 74p, to 2317p. Akeroyd, who took the helm last April, has changed direction from predecessor Marco Gobbetti to compete with European rivals LVMH, Gucci owner Kering, and Hermes.
The 55-year-old has promised to focus on Burberry’s British heritage and bolster its luxury credentials. It comes after the shares dramatically underperformed rivals, growing 44pc in the past five years while LVMH’s are up more than 230pc.
Akeroyd has brought in Bradford-born Daniel Lee as chief creative officer to replace Riccardo Tisci, who left in November. Lee, previously at Italy’s Bottega Veneta, has been tasked with strengthening the connection with ‘ British design, craft and culture’.
Lee has promised to help ‘write the exciting next chapter for this legendary British luxury brand’. His debut collection will be unveiled at London Fashion Week next month, showcasing its ‘potential as the modern British luxury brand’.
Akeroyd promised in November to double sales of leather goods, shoes and womenswear, boost its performance online and increase focus on accessories. The former Versace boss hopes his plans will help Burberry reach £ 5bn in annual sales, up from £2.8bn for its last financial year.
Analysts said the reopening of China was set to put the boosters on. Interactive Investor market head Richard Hunter said: ‘The relaxation of the zero tolerance Covid policy has yet to wash through to the numbers, and this could be an area in which Burberry gains significant advantage.
‘ Traditionally it has reaped the benefit of Asian tourism spending, and the possibility of pent- up demand from locked-down consumers could lead to a coiled spring effect which would complement progress made elsewhere.’
Hunter added that Burberry’s marketing campaigns and futuristic new stores are making it ‘increasingly relevant to a new generation of customers’.