On Thursday, Burberry reported a fall in profits for the first half of the fiscal year, despite an increase in sales. The iconic brand, known for its trench coats and check patterns, posted a profit of £158 million, compared with £193 million a year earlier, while sales climbed slightly to £1.40 billion.
However, same-store sales growth slowed to 1% in the three months to September, well below the previous quarter's 18% increase, signaling a slowdown in global demand for luxury goods. This trend was observed at other industry giants, such as LVMH and Kering, who also reported a slowdown in sales momentum.
Targets under pressure
In its press release, Burberry highlighted the progress made in implementing its strategy to reinforce its identity as a modern British luxury brand. The company highlighted increased sales in its key product categories, including a 21% rise in outerwear and an 8% increase in leather goods. The first collection designed by Daniel Lee, which arrived in stores in September, received encouraging signals, although it is still too early to fully assess its sales performance.
Despite these positives, Burberry warned that if weaker demand persisted, it might miss its double-digit sales growth target for fiscal 2024, and adjusted operating profit could be at the lower end of the current consensus range.
Analysts at Jefferies and Bernstein both commented on Burberry's results, highlighting consistency with trends seen among peers and continued pressure on earnings estimates. Jefferies noted that the early days of Daniel Lee's creative leadership are encouraging, but that it is still too early to judge commercial performance. Bernstein highlighted the fact that Burberry may miss its revenue forecasts if demand conditions remain subdued, which could prompt markets to remain cautious despite better-than-expected earnings in the short term.