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15 July 2020

Burberry Bounces Back

Ben Staniforth, Investment Research Analyst

Luxury fashion brands have been hit particularly hard by the pandemic due to the sector’s heavy reliance on retail stores, and brands have revamped their online offerings in an attempt to compensate for high street closures.

Burberry is no exception -its first-quarter sales reveal a drop of 45% in retail revenue, with sharp losses in its European, Middle East and Africa operations, which saw revenue decline by 75%, and in the Americas, which saw revenue decline by 70%. The Asia Pacific region, an important and fast-growing region for the firm, fared better during that time - with sales declining by only 10%.

Burberry stated that trading improved significantly in June, even producing growth in some regions, suggesting that consumers are starting to return to high streets around the globe. With international travel restarting, the firm is likely to also see a boost from its airport stores. 

However, as with every fashion brand, Burberry’s sales are heavily dependent on how new product launches are received within its client base. Since taking the role of CEO in 2017, Marco Gobbetti has looked to enhance the firm’s exclusivity with recent launches focusing on high-end products and fast-changing fashion. It seems that these launches resonate with consumers, as the company noted an excellent consumer response to its most recent lines, indicating that its revamped online offering is helping to strengthen its brand image. 

However, investors will want to pay close attention to the firm’s profit figures in future quarters. While the reduced costs of halting its fashion shows and new releases are likely to offset some of the declines in retail sales, costs will be expected to rise sharply as its retail outlets reopen. The firm will likely focus on revamping store designs to incorporate both its artistic vision and measures to prevent the spread of COVID-19.

Please note that investments and income arising from them can fall as well as rise in value and you may lose some or all the amount you have invested. Past performance and forecasts are not reliable indicators of future results or performance. Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the companies mentioned. 
 
Burberry Bounces Back
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