Burberry BRBY today said sales fell at a slower annual pace in its third quarter as its revamp started to take effect.
The London-based luxury goods firm said comparable sales declined by 4% in the 13 weeks to Dec. 28 from a year before, compared to a 20% annual drop in the second quarter of the financial year. The rate of decline was unchanged from a year prior.
Broker RBC Capital Markets said this was well ahead of the market consensus, which had predicted a 12% annual decline.
In response, shares in Burberry jumped 15% to £12.22 each in London on Friday. They are up 25% in the year to date and 73.4% in the past six months.
Retail revenue fell 6.7% to £659 million in the 13-week period from £706 million a year prior. Burberry explained that currency was a 4% headwind in the quarter, with revenue down 3% at constant currency.
Sales in the Americas rose 4%, but fell 2% in Europe, the Middle East & Africa and by 9% in Asia Pacific. In the second quarter the three regions saw declines of 18%, 10% and 28% respectively.
But product, outerwear and scarves continued to outperform globally, the firm noted.
Burberry said the launch of Burberry Forward in the quarter had generated “an improvement in brand desirability, an acceleration in the performance of outerwear and scarves, and an uplift in conversion.”
Joshua Schulman, who joined Burberry as Chief Executive in July, said he was encouraged by the response to marketing campaigns but stressed there “remains much to do.”
“Since launching Burberry Forward in November, we have moved at pace to advance our strategy to reignite brand desire, improve our performance and drive long-term value creation. We are encouraged by the response to our ‘It’s Always Burberry Weather’ outerwear campaign and ‘Wrapped in Burberry’ festive campaign.”
Schulman said this had led to an “improvement in brand desirability and strength in outerwear and scarves”.
“The acceleration of our core categories reinforces our belief that Burberry has the most opportunity where we have the most authenticity and that our strategic plan will deliver sustainable, profitable growth over time.
“However, we recognise that it is still very early in our transformation and there remains much to do.”
Burberry said in light of the third-quarter performance, it is now more likely second-half results will broadly offset the first-half adjusted operating loss.
In the 26 weeks to September 28, Burberry reported an adjusted operating loss of £41 million.
“We are confident that our strategic plan will improve our performance and drive long-term value creation,” the firm added.
Burberry will release its results for the financial year ending Mar. 29 on May 14.
By Jeremy Cutler, Alliance News reporter
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
