Stuttering consumer confidence is complicating CEO Jonathan Akeroyd’s attempts to revive Burberry (BRBY.L). Like-for-like retail sales in the quarter to end-September grew a dismal 1% at the UK maker of fancy trench coats, below analyst expectations of 4%. Investors were however spooked after the 6 billion pound group warned it was unlikely to meet its revenue target this year, adding that adjusted operating profit could be close to 552 million pounds, the lower end of analysts’ forecast.
Burberry’s struggle reflects consumers’ diminishing appetite for pricey clothes and bags as inflation slims the wallet of middle-class buyers, the largest cohort of bling shoppers. But brands attempting a revamp, like Burberry or Kering’s (PRTP.PA) star label Gucci, are likely to suffer more than rivals. Shares in sector giant LVMH (LVMH.PA) have contracted by 19% in the past six months against 26% for Kering and 37% for Burberry, LSEG data show. In China, whose shoppers’ purchases account for about 30% of Burberry’s global sales, the UK group’s revenue fell 8% in the second quarter, even though offshore sales picked up markedly. A 10% top-line contraction in the U.S. is also worrying. Akeroyd sounded confident that new designer Daniel Lee’s first collection, which was launched in shops in September, will energise shoppers. For some investors, the wait may be too long. (By Lisa Jucca)
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