Tourists hoping to snap up Burberry products are heading to Paris and Milan rather than London, while luxury shoppers face significant price increases as costs rise, according to the British fashion brand.
Burberry, which plans a return to the “Britishness” of the 167-year-old company in a refocus under the new chief executive, Jonathan Akeroyd, said that American tourists in Europe fuelled a double-digit increase in store sales in the three months to the end of September.
While the UK performed strongly within Burberry’s European operations, its finance and operating chief, Julie Brown, said that the UK government’s decision to stop allowing tourists to reclaim VAT on shopping purchases has hurt Britain’s status as a holiday shopping destination.
“There has been an increase in tourists, particularly American, but not at the same degree as we used to see,” she said. “More tourists are going to Paris, Milan and continental Europe. Tax-free shopping was a real incentive for the luxury shopper to come to the UK.
“The UK is performing well, but we are now finding tourists are tending to go more to continental Europe, and that also has knock-on implications for other industries including hospitality and hotels.”
The company said that tourist growth across the Europe, Middle East, India and Africa (EMEIA) region more than doubled in the six months to the end of September, in turn doubling its share of sales to more than 40% of the total for the region.
Burberry reported an 11% increase in comparable store revenues in the three months to the end of September, as shoppers snapped up the brand’s luxury handbags and signature trench coats. First-half revenues were £1.34bn, with the EMEIA region up a quarter for the period.
Brown said sales of its leather goods range, led by the Lola handbag, and outerwear, rose by 11% and 18%, excluding mainland China, which has been affected by Covid restrictions.
“Burberry’s affluent customer base is more immune to the cost of living crisis, while its strong brand identity and British heritage drives ongoing appeal among tourists,” said Pippa Stephens, apparel analyst at GlobalData. “However, it is still underperforming key luxury competitors LVMH and Kering, likely due to its designs being less aspirational.”
Former Versace boss Akeroyd, who joined Burberry in March, was scheduled to give further details of new plans on Thursday that aim to grow Burberry into a £5bn revenue global luxury brand within five years.
The company, which operates 454 stores, concessions and franchises globally, said the new plan will “refocus on Britishness and strengthen our connection with British design, craft and culture”.
Akeroyd and the new creative chief, Daniel Lee, aim to double the sales of leather goods, shoes and women’s readywear, and increase outerwear revenues by half, in the medium term.
There is also a goal to grow sales of accessories to account for more than 50% of total revenues in the longer term. Accessories currently make up about 36% of sales.
The new plan is likely to result in an increase in the manufacturing of Burberry products in the UK. Currently, Burberry weaves gabardine, which is used in its trench coats, in Keighley, West Yorkshire.
The trench coats themselves are made an hour away in Castleford, while Burberry’s cashmere scarves are produced in Scotland. Its leather goods, such as hand bags, are manufactured in Italy.
“We are a brand with a very strong history, we are the biggest luxury brand in the UK with more than 160 years of history,” said Brown. “We [will be] focusing on our modern British luxury positioning and bringing all our products to their full potential.”