LONDON (Reuters): Burberry will struggle to meet its annual revenue forecast of low double-digit growth after a global slowdown in luxury spending, the British company said on Thursday.
The company, which launched the first collection by designer Daniel Lee in September, reported a sharp slowdown in comparable store sales growth in its second quarter to 1%, down from 18% in the first, as growth in China evaporated.
Shares in Burberry fell 10% in early trading, and the downbeat tone weighed on the wider sector.
Rising inflation and economic uncertainty have curbed shoppers’ appetite for luxury after years of blockbuster demand, prompting investors to trim forecasts.
LVMH, the world’s biggest luxury group with brands including Louis Vuitton, Dior, and Tiffany, reported a slowdown in quarterly sales in October, as did Kering with its Yves Saint Laurent, Balenciaga and Bottega Veneta brands.
At Burberry, China retreated in the second quarter after a rebound from the impact of COVID-19 lockdowns.
Demand in China weakened throughout the quarter, and the extent of the slowdown was clear in September, Chief Financial Officer Kate Ferry told reporters.
“The exit rates that we saw at the end of Q2 have continued into the (current) quarter,” she said.
Local demand also shrank in the home market of Britain and in the Americas comparable store sales dropped 10%.
Burberry said spending by Chinese luxury consumers had shifted overseas from mainland China, and tourist growth helped European destinations, it said, with just over half of spending in the region coming from international visitors.
Chief Executive Jonathan Akeroyd said: “While the macroeconomic environment has become more challenging recently, we are confident in our strategy to realise our potential as the modern British luxury brand, and we remain committed to achieving our medium and long-term targets.”
Burberry said on Thursday that early indicators of demand for its Winter ’23 collection were encouraging, and it had achieved a good performance in the categories of outerwear and leather goods in its first half.