Takeaways#
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Burberry has seen a strong recovery in its store sales, which jumped from a 45 percent decline over the first quarter to a 6 percent decline during the second quarter while reporting sales growth in October.
The brand’s localized campaigns in Mainland China, including a trench coat campaign featuring Chinese ambassador Zhou Dongyu, performed well with local consumers.
Burberry's retail operations in China (including Hong Kong and Macau), Malaysia, Singapore, and Thailand are now carbon neutral and source 100 percent renewable electricity.
It looks like the worst might be over for Burberry. For the first half of the fiscal year 2021, which ended on September 26, the British luxury fashion house saw a 31 percent revenue drop to 1.15 billion (£878 million), as compared to the same period a year ago. But, the group has seen a strong recovery in its store sales, which jumped from a 45 percent decline over the first quarter to a 6-percent decline during the second quarter. And on November 12, it reported sales growth for its interim results during October.
Burberry CEO, Marco Gobbetti, said in a statement that COVID-19 continues to impact sales in Europe, the Middle East, India, Africa (EMEIA), Japan, and the South Asia Pacific. But, he added, the company is “encouraged by our overall recovery and the strong response to our brand and product, particularly among new and younger customers.”
Like many luxury companies, Burberry has been grappling with store shutdowns and international travel bans since January (60 percent of its global stores were closed when FY 2021 commenced.) But, unlike many of those brands, the British luxury company also went through a reorganization at the onset of the pandemic, including 500 worldwide staff cuts that were part of a 72 million (£55 million) cost-cutting plan.
Asia Pacific is the best-performing region in Burberry’s H1, thanks to strong performance in Mainland China and Korea, the company noted. In Mainland China, Burberry said that it saw a positive reaction to localized campaigns and a strong response to its core product categories like leather goods (particularly the Riccardo Tisci-designed Pocket bag) and outerwear.
While outerwear was negatively impacted by lockdowns and work-from-home schedules in other parts of the world, it saw high double-digit growth in Mainland China during Q2. This boom was mainly due to the brand’s localized Trench campaign — promoted by China ambassador Zhou Dongyu — which generated nearly 100 million impressions across social media channels. Also of note, Burberry announced a partnership with Tencent Games via its blockbuster online game Honour of Kings earlier this month.
Having mentioned Mainland China in its statement 12 times, it is clear that the company isn’t shying away from acknowledging the importance of Chinese consumers in a post-COVID-19 retail world. Over the first six months of FY 2021, nine out of Burberry’s 12 new stores opened in China, including the brand’s first social retail store (a collaboration with WeChat-owned Tencent) in the southern tech hub of Shenzhen. The company closed 12 stores during the same period in undisclosed locations.
Regarding its efforts in environmental, social, and corporate governance, Burberry said that its retail operations in China (including Hong Kong and Macau), Malaysia, Singapore, and Thailand are now carbon neutral and source 100 percent renewable electricity. Additionally, it has become the first luxury company to join the Stonewall Diversity Champions Program, which assists employers in making their workplaces LGBTQ+ friendly.
As another wave of COVID-19 looms over the West, Burberry’s immediate financial performance could largely hinge on China and its consumers. In fact, “Global Chinese Consumer Spending” is listed as an item under Burberry's “strategic and financial risks” alongside other crucial points like brand “image and reputation.”
“Any significant change to Chinese consumer spending habits or the economic, regulatory, social, or political environment in China, including a further global health emergency or a natural disaster, may adversely impact the consumer group’s disposable income or confidence,” the report states.