Burberry Sees Its Sales Fall By 45% In The First Quarter, 500 Redundancies Envisaged

Brief translated from AFP (Agence France Presse)

 

The British luxury clothing and accessories group Burberry saw its sales fall by 45% year-on-year to £257 million in its delayed first quarter, and is considering hundreds of job cuts, suffering the impact of the pandemic.

Despite an improvement in June, particularly in Asia but also in the United States and Europe with the start of deconfinement, the group expects that store traffic will continue to suffer strongly from the measures taken against Covid-19 in the second quarter and expects sales to fall by 15 to 20%.

The group is therefore planning a reorganisation and in particular the elimination of 500 jobs, or 5% of its worldwide workforce (10,000 people), a spokeswoman told AFP on Wednesday.

In the United Kingdom, the changes would concern administrative functions and could result in the loss of 150 jobs out of a total of 3,500, although consultations are still under way.

"We hope to redeploy some of these roles to reduce the number of redundancies," the spokeswoman said.

The changes are expected to deliver savings of £35 million this year, £55 million on an annualised basis, with a restructuring charge of £45 million.

Between April and June, sales collapsed by 75% year-on-year in Europe and almost as much in the US, but less so in Asia (-10%) where business has picked up significantly in China, one of the group's main markets, Burberry said in a release.

As the Western and Asian economies began to gradually reopen from May onwards, the year-on-year decline in sales nevertheless eased to just 20% in June, notes the press release.

In particular, sales returned to growth in Asia with a 30% jump in mainland China in June compared to pre-pandemic levels in January, as some Chinese customers who usually travel abroad shifted their purchases to local stores.

"In our first quarter, revenue was hit hard by the fall in demand for luxury goods due to Covid-19 and we expect it will take time to return to pre-crisis levels," notably due to the slow recovery in international air traffic, notes Marco Gobbetti, Group CEO, quoted in the press release.

Burberry generates a large part of its turnover from tourists, particularly at airports.

Gobbetti says he is "encouraged" by the pace of sales recovery in June and the "excellent" response to new product launches, particularly online. "Based on our June performance, we expect second quarter sales to decline by 15-20% year-on-year.

The group expects the second quarter (July to September) to continue to be strongly impacted by the pandemic with a "still negligible" flow of tourists into stores and still a number of stores closed or operating at reduced hours.

These prospects of a very slow recovery caused the share price to fall by 7.5% by mid-morning on the London Stock Exchange.

 

ved/bp/lth

BURBERRY GROUP

LONDON STOCK EXCHANGE GROUP PLC

 

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