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Burberry insists Chinese backlash over Xinjiang row has not hurt sales

·3 min read
Burberry
Burberry

Burberry sales in China have remained strong despite a backlash following a string of accusations from the West about forced labour in Xinjiang, its chief executive has insisted.

Marco Gobbetti told analysts he was pleased with the start of the new financial year in the region as the company updated the City on its performance for the year to March 27.

Shares fell as much as 9pc despite sales jumping by almost a third in the last quarter after strong demand from rich shoppers in Asia and America, and the dividend being restored.

The recent US sanctions over forced labour conditions in Xinjiang triggered a series of rebuttals from Chinese state media followed by a wider boycott of western retailers including Burberry, H&M, Nike, adidas and Zara.

In March, the FTSE 100 company lost a Chinese brand ambassador and its hallmark tartan design was ditched from a popular video game as part of a wider tie-up with Chinese technology giant Tencent.

The move sparked concern among industry observers that shoppers might shun the brand and dent sales in its most important market.

Mr Gobbetti, who is spearheading a turnaround, said Burberry “had to and will continue to navigate through” the disruption in China, like most other brands.

“Our performance is strong and the numbers have been very good. I will restate that we have seen a limited impact in China for the time being," he said.

“China is a primary focus for us, so we remain extremely, extremely confident and we will continue to invest in the market.”

Julie Brown, the finance chief, said the company continued to have “very good relations” with Chinese online marketplace Tencent, but declined to comment further.

Workers at the perimeter fence of what is officially known as a vocational skills education centre in Dabancheng, Xinjiang province  - REUTERS/Thomas Peter
Workers at the perimeter fence of what is officially known as a vocational skills education centre in Dabancheng, Xinjiang province - REUTERS/Thomas Peter

She warned that it will take “a couple of years, no question” for international travel to return.

This has prompted Burberry to try to rely less on tourism shopping and target local customers in the US and Asia-Pacific instead and sell more shoes and leather goods online.

Before the pandemic about half of its sales were dependent on tourist purchases.

The fourth-quarter rebound in like-for-like store sales came despite 18pc of its shops globally still remaining closed due to lockdowns.

The strong performance helped limit the fall in annual revenues to 11pc, with retail turnover down 9pc. Total revenue dropped to £2.3bn from £2.6bn in the previous year.

Underlying pre-tax profits fell 12pc to £366m for the year to March 27.

Burberry said its UK stores were showing “good promise” since reopening on April 12, but were suffering from the lack of overseas spending, which accounted for two thirds of UK sales before the pandemic.

The retailer is pressing ahead with the rollout of a new store format, centred around technology to support sales. The refurbished flagship store on Sloane Street in London opens next month.

It expects revenues to continue recovering, with growth in the “high single” digits, although an ongoing push to reduce discounting will take its toll.

It restarted dividends with a 42.5p a share full-year payout, matching 2019 levels.

Shares were still 7pc lower at £19.58 in afternoon trading amid wider London market falls. However, the stock is considerably higher than its £13.60 level at this time last year.