By Helen Reid and Yadarisa Shabong
(Reuters) -Burberry reported a 2% rise in second-quarter comparable store sales on Thursday, beating market expectations, as the British luxury brand’s turnaround measures started to bear fruit and its China business showed signs of recovery.
The return to growth for the 169-year-old trench coat maker comes after CEO Joshua Schulman refocused Burberry on outerwear and scarves, promoting an accessible Britishness aesthetic to global shoppers. Analysts had forecast a 1% rise in comparable store sales, following seven quarters of decline, according to a company-compiled poll.
Schulman has tightened the link between creative director Daniel Lee’s design decisions and commercial teams, aiming to restore the brand’s core identity after straying from recognisable codes and pushing up prices on items like bags and shoes for which Burberry is not well known.
“For the last ten years, they (Burberry) tried to follow the playbook of other brands out there, they tried to do high fashion, they tried to do leather goods which is extremely competitive… now they’re trying to reconnect more with what the brand is really about,” Morningstar analyst Jelena Sokolova told Reuters.
“Now there is a clear trend for improvement,” she added.
Shares in Burberry were up 2% by 0825 GMT.
Burberry said comparable sales in China returned to growth for the first time in more than a year, rising 3%, a sign its new marketing campaigns are stimulating demand from Chinese luxury buyers, who have cut back on spending in recent years.
“We have begun to see customers return to the brand they love,” Schulman said in a statement.
Adjusted operating profit for the six months ended September 27 came in at 19 million pounds ($25.5 million), beating average market expectations of 12 million pounds. Burberry had reported a loss of 41 million pounds in the same period last year.
Burberry’s shares are up 28% since the start of the year as investors have welcomed Schulman’s marketing overhaul and cost cuts, and as the broader luxury sector also began to show signs of recovery.
A key test of Schulman’s strategy will come this quarter, with holiday shopping crucial for Burberry. The brand is betting on “scarf bars” in stores to showcase cashmere scarves priced between $450 to $1,150.
($1 = 0.7451 pounds)
(Reporting by Yadarisa Shabong in Bengaluru; Editing by Jan Harvey and Elaine Hardcastle)
