Burberry sales exceed predictions after drastic redesign

Global fashion brand Burberry has seen an excellent consumer response to Riccardo Tisci’s newly designed collections meaning strong double-digit percentage growth compared to prior year equivalent collections.

CEO Marco Gobbetti has described Burberry ‘s first quarter a good one in the multi-year transformation, with an encouraging reaction to the collections from new creative director Riccardo Tisci.

He said: “This was a good quarter in our multi-year journey to transform Burberry. We increased the availability of products designed by Riccardo, while continuing to shift consumer perceptions of our brand and align our network to our new creative vision. The consumer response was very promising, delivering strong growth in our new collections. We are on track with our plans and we confirm our outlook for FY 2020.”

The group also confirmed it expects to receive a £15m profit boost from favourable currency movements.

The shares moved around 8% higher following the announcement.

Industry reaction

George Salmon, Equity Analyst at Hargreaves Lansdown

The strong uptake of the new designs means the transformation, led by Riccardo Tisci and Marco Gobbetti, has started well. But the Italian job is all about the end. Burberry will need to prove itself capable of maintaining this momentum over the next couple of years.

While the brand is taking a new direction, one thing that won’t change is the importance of Asia. Sales in Asia are growing strongly, but to focus solely on that figure would be to understate the geography’s importance. A significant portion of Burberry’s UK sales come from luxury shoppers traveling in from the East, and with the pound’s weakness further encouraging these affluent shopping tourists to fly over, UK sales have enjoyed a boost.

While the ongoing trade wars and economic uncertainty could hurt the group in the short-term, a huge cash surplus means investors should be getting their dividend come what may. And taking a long-term view, we think Burberry commands a strong position. The brand has a unique British heritage, while increasing wealth in key Asian markets should prove a tailwind over time.