Burberry has forecast a surge in profits after attracting younger shoppers with puffer jackets and trainers under the designer Riccardo Tisci and benefiting from a rebound in the luxury goods market as lockdowns unwind across the world.
Fellow luxury brands Richemont and Prada also revealed strong trading as wealthy consumers splashed out on bags, watches and designer clothing after being unable to spend money on holidays and nights out because of Covid-19 restrictions.
“As we emerge from the pandemic and people start to socialise and travel more it appears the wealthy are lapping up luxury items, with Burberry the latest name in this space to report strong trading,” said Russ Mould, investment director at AJ Bell.
Burberry said full price sales were up 26% compared with pre-pandemic levels in the three months to 25 December after 10% growth in the previous quarter, as it sold more full-price items including Burberry trainers, raincoats and bags.
The British luxury brand said it now expected to increase full-year profits by 35% year on year to between £500m and £515m, up from City analysts’ previous forecasts of just over £470m.
The positive update came after Richemont, which owns brands including Cartier and Piaget, said sales rose 35%. That included a 41% rise in sales of jewellery, a 29% increase on watches and a 40% rise in fashion and accessories led by Chloé and Montblanc. Growth was strongest in the Middle East followed by the Americas and Asia.
Prada said its sales were up 41% year on year and it had seen a “significant increase” in underlying profit as its customers had returned to physical stores.
Burberry credited strong profits growth to its designer Tisci’s products attracting younger shoppers.
Sales in Asia rose by 22% compared with the same quarter two years ago, up 5% on the previous three months, amid strong sales of coats, puffer jackets and different versions of its Lola bag. In Europe sales were down 4% on two years ago, with low numbers of tourists who accounted for 40% of Burberry’s sales before the pandemic.
But the drop was a dramatic improvement on the 27% dive in the previous quarter as the chief operating officer, Julie Brown, said Burberry’s new image was proving attractive to more local shoppers.
Sales in the US and Canada also continued to increase strongly as Brown said puffer jackets, a quilted coat and casual footwear featuring the Burberry check had helped attract more male shoppers.
Brown said Burberry was seeing inflation, particularly on shipping and trucking costs, but she said the company was working hard not to pass those costs on to its shoppers. “We will keep the situation under review and will look for efficiencies in our cost base first,” she said.
Gerry Murphy, the chair of Burberry, said: “Despite the ongoing challenges of the external environment, we are confident of finishing the year strongly and providing an excellent platform on which to build when our new chief executive, Jonathan Akeroyd, joins in April.”
Burberry is in the process of switching management, after it poached Akeroyd from Versace to take over as chief executive from Marco Gobbetti, who was part way through a turnaround plan aimed at taking Burberry further upmarket, with prices in line with its French and Italian rivals. Gobbetti will step down at the end of the year, after saying he wanted to return home to Italy.
Gobbetti brought Tisci to Burberry in 2018, having previously hired him at the luxury brand Givenchy.