Burberry, the British luxury brand, reported an 11% increase in quarterly comparable store sales, exceeding market expectations, thanks to increased tourist spending in Europe and the relaxation of COVID restrictions in China.

The second-quarter performance increased first-half revenue to 1.35 billion pounds ($1.61 billion), up 5% in constant currency and slightly ahead of expectations, while adjusted operating profit increased 6% to 238 million pounds.

Along with the results, Chief Executive Jonathan Akeroyd presented his growth strategy, which includes a target to broadly double sales of leather goods, which currently account for 36% of Burberry’s total, shoes, and women’s ready to wear, and to grow outerwear by around 50% in the medium term.

Burberry said it would “refocus on Britishness” under the creative direction of its new designer Daniel Lee.

“Our focus in this next phase is on growth and acceleration,” Akeroyd said, adding that the brand’s long-term ambition was to achieve sales of 5 billion pounds.

Burberry, known for its camel, red and black check, and trenchcoats, maintained near-term revenue growth in the high single digits and a margin of around 20% through the end of its fiscal year in 2024.

Finance director Julie Brown stated that the company’s goal in the medium term – three to five years – was to increase sales to 4 billion pounds while maintaining its margin target.

Despite some local COVID lockdowns in September, she said comparable store sales in mainland China, Burberry’s largest single market, fell 1% in the second quarter after falling 35% in the first.

“In the first quarter we had some of the major cities locked down – Shanghai and Beijing – which impacted trading,” she told reporters. “In the second quarter the situation eased considerably.”

Europe performs well, with sales increasing by 25% in the second quarter, boosted by an increase in tourists from the United States, the Middle East, and Asian locations other than mainland China.

Overseas visitors in cities such as Paris, London, and Milan accounted for 40% of total business. Prior to the pandemic, that figure was closer to 60%.

“The big tourists going into EMEIA are essentially Americans and also the Middle Eastern nationalities.”

However, the Chinese tourist remained absent, with approximately 97% of Chinese customers spending occurring in China.

The Americas remained a weak spot, with quarterly sales falling 3% due to lower demand for entry-level items and U.S. customers spending in Europe rather than at home.

(Adapted from BusinessTimes.com.sg)