By Helen Reid and Yadarisa Shabong
LONDON (Reuters) -Burberry posted its first quarter of growth in two years on Thursday as the British luxury brand’s turnaround efforts started to bear fruit and China returned to growth, lifting the shares more than 8%.
Burberry reported a 2% rise in second-quarter comparable store sales, beating analysts’ forecasts of 1% after seven straight quarters of decline. CEO Joshua Schulman has refocused the 169-year-old trench coat maker on outerwear and scarves, promoting an accessible British aesthetic which has resonated with shoppers.
“With our timeless British luxury brand expression and an improved product offer, our brand has become more desirable,” Schulman said in a call with journalists.
BRITISH ‘WARMTH AND WIT’
Schulman, an American, has sought to inject British “warmth and wit” into Burberry’s marketing, he told analysts and investors on Thursday.
Burberry’s holiday campaign features Absolutely Fabulous star Jennifer Saunders hosting a Christmas party for guests including supermodels Naomi Campbell and Rosie Huntington-Whiteley, and actor Ncuti Gatwa, playing on British stereotypes.
Burberry’s advertising has helped the brand stand out from its peers, said Morningstar analyst Jelena Sokolova.
“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,” she said.
Schulman has also tightened the link between creative director Daniel Lee’s design decisions and commercial teams, saying Burberry had strayed from recognisable codes and pushed up prices too far on items like bags and shoes.
Less expensive versions of catwalk styles have seen strong sales, Schulman said in the analyst presentation, highlighting a bestselling 2,490-pound burgundy patterned trench coat that is similar to a 10,000-pound fringed coat modelled by Campbell in the February show.
CHINESE CUSTOMERS RETURNING
Burberry’s comparable sales in China returned to growth for the first time in more than a year, rising 3%, an encouraging sign after Chinese luxury buyers had cut back on spending in recent years.
“In China specifically, we’re really excited about what we’re seeing there,” Schulman said, adding that Burberry has seen 10% growth in returning customers in the country, and is becoming more popular among younger Gen Z customers.
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 more than 30% 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 in the holiday shopping period, as Burberry rolls out “scarf bars” in stores to showcase cashmere scarves priced between $450 to $1,150.
Burberry reported revenue of 1.032 billion pounds ($1.39 billion) for its first half, down 5% from the same period last year.
($1 = 0.7451 pounds)
(Reporting by Yadarisa Shabong in Bengaluru; Editing by Jan Harvey and Elaine Hardcastle)
