Covid19: Burberry faces significant challenge from lack of tourism

Burberry sales fell by nearly a half in its first quarter as lockdown hit it globally and it faces more challenges ahead from a continued lack of tourism.

The fashion company reported an overall 45% fall in Q1 – encompassing the 13 weeks to June 27 – with the trend easing to a decline of 20% in June. The bright spot was Asia-Pacific, which slipped a more modest 10% and returned to growth in June.

Burberry has continued to focus on its digital capabilities such as immersive experiences that involve pop-up stores incorporating augmented reality. This helped online full price sales to grow by double-digits in the quarter.

The company expects Q2 to be “materially impacted by the pandemic” with the expectation that tourist flows will remain negligible. This is forecast to result in revenues in the second quarter falling by 15-20%.

“In Q1, sales were severely impacted by the drop in luxury demand from Covid-19 and we expect it will take time to return to pre-crisis levels with the resumption of overseas travel. We are encouraged by the improving trends in all regions and the promising exit rate for June,” said Marco Gobbetti, CEO of Burberry.

“We saw an excellent response to new product launches in recovering economies as well as online. Demand for leather goods was particularly strong in Mainland China and Korea, bringing new, younger luxury customers to the brand. As we enter the second phase of our strategy, we are sharpening our focus on product and making other organisational changes to increase our agility and generate structural savings that we will be able to reinvest into consumer-facing activities to further strengthen our luxury positioning.”