Burberry warns on China impact, shrugs off inflation

Burberry, the British fashion business, warned on Wednesday that future success would be determined by the amount of economic recovery in China, a crucial market impacted by ongoing Covid lockdowns.

Burberry also said it was dealing with the effects of the worst inflation in decades, with news that its net profit and revenue had increased in the year to the end of March.

“Our outlook is dependent on the impact of Covid-19 and rate of recovery in consumer spending in mainland China,” Burberry said in a statement.

“While the current macro-economic environment creates some near-term uncertainty, we are actively managing the headwind from inflation,” added the group steered by new chief executive Jonathan Akeroyd, poached from Italian rival Versace.

For the 12 months to the start of April, Burberry posted net profit of £396 million ($492 million, 468 million euros).

That was up five percent compared with its previous financial year ending in late March 2021.

Group revenue jumped 21 percent to £2.8 billion.

“Burberry is a unique British company with an extraordinary history and heritage and it is a privilege to take the reins in this next phase,” said Akeroyd.

“The company has made great progress over the last five years to elevate the brand, product and customer experience into the luxury space.”

Akeroyd said he looked forward to setting out his plans for future growth later in the year.

Following the results update, Burberry’s share price was up 0.2 percent at £15.86 in London afternoon deals.

“Burberry’s first set of results under new CEO Jonathan Akeroyd painted a promising picture of the luxury retailer,” noted Laura Hoy, equity analyst at Hargreaves Lansdown.

“But the market was reluctant to cheer Burberry’s results, instead of focusing on the note of caution in management’s guidance.”

She said it was a comfort for the retail industry that inflation played such a minor role in the cautious forecast.

“Millionaires buying high-ticket handbags aren’t as worried about rising food and fuel prices, so the brand is relatively insulated in that respect.”