Burberry Group PLC shares surged after a U.S. pickup boosted Trench-Coat Maker’s results and boosted hopes of investors hoping for a recovery in the luxury market.
Burberry said in a statement Friday that it beat analysts’ forecasts of almost 13%. Sales in the Americas unexpectedly rose, but sales in China were lower than estimated.
Chief executive Joshua Shulman, who joined the company in July, has vowed to overhaul the label and return it to its roots of recognizable outerwear, including a 2,000-pound ($2,480) trench coat. Burberry was struggling as its predecessors tried to further elevate the brand and expand its products into high-end handbags.
The British group’s latest performance shows improvement in Glimmer, following a big sale from Cartier owner Richmont last week, and hopes luxury demand has bottomed out. . All eyes will be on LVMH Ennessy Louis Vuitton SE, the largest luxury group reporting earnings next week.
Burberry shares rose as much as 17%, its biggest gain since November, and took its gain this year to 25%. That comes after the stock has fallen by more than half over the past two years. Rivals such as Gucci owner Kering SA, LVMH and Moncler Spa also climbed.
Results for the second half of Burberry’s financial year, which ends in March, could offset losses in the first half thanks to performance in the holiday period, the company said on Friday. Demand in the U.S. was particularly strong in New York City after Shulman reopened its flagship store on 57th Street.
Still, the label cautioned that the economic environment remains uncertain, its transformation is in its early stages, and more can be done.
“We believe these results are a first (and early) step in the right direction,” wrote RBC Capital Markets analyst Piral Dadhania.
In fact, Burberry cut some product prices by 50% during the festive season, prompting Barclays’ concerns that the discounts could hurt its cash among shoppers.
Chief Financial Officer Kate Ferry told reporters that the impact of the markdown was limited to the period and was less than 2 percentage points of quarterly performance. Demand was particularly strong for scarves that weren’t on sale, she explained. Burberry uses limited discounts to clear old stock. This is a decision announced in November.
“Burberry’s efforts to clear inventory through significant discounts have helped sell sales effectively and manage stock levels,” said Mamta Valecha, analyst at Kilter Cheviot. .
Luxury labels have been played unevenly as consumers dive into everything from Louis Vuitton bags to Rolex watches. The past two years have proven tougher, especially for companies like Burberry that rely on wealthy and aspirational customers.
Even the exclusive Chanel is showing signs of weakness, cutting 70 jobs in the US after warning of a tougher trade environment.
Written by Angelina Rascoette
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