Given the slow demand for luxury, Burberry believes it is unlikely to achieve previously stated revenue guidance of low double-digit growth for FY24.
The company expects adjusted operating profit would be towards the lower end of the current consensus range of 552 million pounds to 668 million pounds.
Burberry’s second quarter comparable store increased just 1 percent, with first half retail comparable sales increasing by 10 percent.
"While the macroeconomic environment has become more challenging recently, we are confident in our strategy to realise our potential as the modern British luxury brand, and we remain committed to achieving our medium and long-term targets," said Jonathan Akeroyd, Burberry’s chief executive officer in a statement.
Burberry results hit by low luxury spending
The company said that sales in Asia Pacific grew 18 percent and slowed to 2 percent in the second quarter. Mainland China comparable store sales increased 15 percent in the half but fell 8 percent in the second quarter. South Korea fell 1 percent in the half with a 7 percent decline in Q2. Japan saw comparable store sales growth up 43 percent in the half and 41 percent in Q2 driven by tourists. South Asia Pacific rose 30 percent in the half and 22 percent.
EMEIA first half comparable store sales were up 14 percent and second quarter sales rose 10 percent benefitting from tourist growth of 39 percent for the half with the share of mix from tourists increasing to 51 percent of retail sales with a strong performance from American and Asian tourists.
The company added that continental Europe outperformed the regional average in the half but the UK continued to lag. Americas declined 9 percent in the half with Q2 down 10 percent.
Review of Burberry’s first half performance
Burberry’s outerwear comparable store sales grew 21 percent in the first half and 10 percent in Q2. Leather goods comparable store sales grew 8 percent in the half and 3 percent in Q2 driven by bags. Ready-to-wear excluding outerwear grew 6 percent in the half with men’s up 6 percent and women’s increasing 7 percent.
The company increased the number of updated stores by 33 in the half, bringing the total of stores in new design to 140 and remains on track to complete more than 50 percent of the network by the end of this financial year.
Burberry’s wholesale revenue decreased 8 percent at both CER and reported rates in the half driven by a weak Americas performance. The company expects the full year to be down a mid-single digit percentage with the channel impacted by the macroeconomic environment.
The company further said that licensing revenue grew 44 percent at CER and 45 percent at reported exchange rates in the half driven by a strong performance in beauty.
Adjusted operating profit increased 1 percent at CER and fell 6 percent at reported with the margin down 110 bps and 180 bps respectively. Gross margin increased by 30 bps at CER and fell 30 bps reported. Adjusted operating profit was 223 million pounds reported and adjusted pre-tax profit was 219 million pounds.