Burberry’s recovery derailed by China’s draconian Covid curbs as sales in the luxury fashion firm’s key market fall 13%
Burberry sounded the alarm over the year ahead as China’s draconian lockdowns threaten to derail its turnaround plan.
Reporting results yesterday for the year to April 2, the luxury fashion house failed to offer an update on current trading. But it did say sales in China fell 13 per cent in the final quarter.
It is heavily dependent on sales in China and said lockdowns in the country began to take a toll in March.
Checking profits: Luxury fashion house Burberry said sales in China fell 13% in the final quarter with many Chinese cities now under strict lockdown
Many Chinese cities have been under total lockdowns for weeks, sending a shockwave through the global economy and fuelling supply chain chaos.
Burberry makes two-fifths of its sales in China, and is popular among the increasingly wealthy middle and upper class.
It faces a hit from the strict lockdowns, but also the prospect of Chinese shoppers spending less when the country emerges from the pandemic as its economy takes a hit.
Goldman Sachs has cut its forecasts for China’s economic growth this year to 4 per cent, as the zero-Covid policy takes its toll, down from an earlier estimate of 4.5 per cent growth.
Shore Capital retail analyst Clive Black said: ‘What Burberry highlighted is the uncertainty around China. It is clearly worried about where things could go.’
Burberry downplayed the lockdowns, standing by its forecasts for the year ahead of ‘high single-digit’ sales growth.
But it said that will be ‘dependent on the impact of Covid and the rate of recovery in consumer spending in mainland China’.
Finance boss Julie Brown said: ‘We’re always prepared for an upside case and we’re always prepared for a rebound and, actually, in China we do find that recovery is very strong when it comes.’
For the year to April 2, Burberry posted £2.8billion in sales, a 23 per cent jump. Full-year profit was £523million, up 32 per cent from a year earlier.
Shares rose 0.5p to 1584p, in new boss Jonathan Akeroyd’s first outing as chief executive.
He took the helm in April, having run Versace since 2016.