Burberry sees signs of hope in Asia despite slump elsewhere

The coronavirus pandemic has snarled Burberry’s attempts to revive sales. Bloomberg

Burberry Group said mainland Chinese stores have returned to growth, joining luxury rival LVMH in pointing to light at the end of the tunnel even as a lockdown-induced slump deepens elsewhere.

Since the start of April, the company’s sales have returned to growth in South Korea, too, as some consumers catch up on purchases thwarted by the virus.

“It will take some time for luxury to recover from Covid-19 and for consumer confidence to return to pre-virus levels,” chief financial officer Julie Brown said on a call with reporters, adding that growth in China and Korea has reached double-digit percentages recently. “We’re seeing very encouraging signs.”

About half of the British trenchcoat-maker’s 421 stores remain closed, putting pressure on sales for the three months through June. Burberry said that store closures would likely remain at their peak throughout the period.

The coronavirus pandemic and lockdown measures to contain it have snarled Burberry’s attempts to revive sales under designer Riccardo Tisci and chief executive Marco Gobbetti, both formerly of luxury conglomerate LVMH and its French fashion house Givenchy. After two years of broadly flat business, Mr Gobbetti’s turnaround plan was supposed to lead to accelerating sales and margin expansion starting this year.

Some of the rebound in mainland China may be due to consumers repatriating their luxury shopping due to travel restrictions. Prior to the crisis, about half of Chinese luxury spending took place abroad.

The key to a recovery is countries balancing social distancing and controlling the virus, Ms Brown said.

“China and Korea are showing very good signs of being able to do this,” she said. “In terms of durability, it looks very promising.” Retail sales fell 3 per cent on a comparable basis in the 12 months ended on March 28. Analysts had expected a decline of 4.6 per cent.