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Burberry Issues Positive Revenue, Profit Warning Ahead of Yearend

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Samantha Conti
·2 min read
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LONDON — Burberry has seen a “strong rebound” in performance since December, and expects full-year revenue and adjusted operating profit to be ahead of consensus expectations.

The company’s fiscal year ends on March 27, with full-year results set to be released on May 13.

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“Since December, we have continued to see a strong rebound and now expect revenue and adjusted operating profit to be ahead of consensus expectations,” the company said in a brief statement.

Comparable-store sales in the fourth quarter are expected to be in the range of 28 percent to 32 percent higher than the same period last year.

For the full year, the company said that group revenue is set to decline by 10 percent to 11 percent, while the adjusted operating margin will be in the range of 15.5 percent to 16.5 percent.

Royal Bank of Canada said Burberry’s announcement suggests a “strong acceleration” in the fourth quarter. “More importantly, it suggests healthy margin recovery in the second half, most likely benefiting from gross margin expansion” from a higher full-price sales mix, lower markdowns, and positive channel mix.

The bank said that along with Prada’s positive current trading comments earlier this week, Burberry’s announcement “is further confirmation of supportive trends in Jan-March ’21, which is likely to read positively for the wider sector.”

The markets welcomed the news, with Burberry shares closing up 7.7 percent at 21.40 pounds on Friday.

Burberry’s fourth quarter will contrast starkly with the fiscal third quarter, when Burberry was hit by a perfect — and partly self-inflicted — storm as the brand wrestled with the impact of COVID-19-related store and outlet closures, and curtailed seasonal discounting.

In that period, the company saw revenue shrink 4.3 percent to 688 million pounds in the period, with up to 15 percent of its store network closed at one point in the three months to Dec. 26.

Store closures averaged 7 percent overall in the third quarter, and the situation was far worse in some regions. As of late January, 15 percent of Burberry’s physical stores were shut.

After a promising start in October, comparable store sales fell 9 percent in the three months, due to Burberry’s deliberate strategy to wind down discounting, and to a lack of international tourists shopping at its upscale outlets in malls run by companies including Value Retail and McArthurGlen worldwide.

Last November, Burberry had touted a return to growth in comparable store sales in October, the start of the third quarter. It was a hopeful sign after comp-store sales fell 45 percent in the first quarter, and 6 percent in the second quarter, due to the impact of COVID-19.

At the time, Julie Brown, chief operating and chief financial officer, said despite the contraction in sales, Burberry was moving in the right direction, with “high-single-digit growth” in the full-price business.