Analysts see Burberry reaching pre-pandemic profits
The luxury fashion brand is likely to be less severely hit by the soaring cost of living.
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Your support makes all the difference.Even the least optimistic analysts think Burberry will beat its pre-pandemic results for the first time since Covid-19 started, despite ongoing restrictions in China.
The business is expected to show a nearly one-fifth hike in its operating profit, reaching £230 million in the six months to the end of September.
For Burberry it will be the first opening half to a year where it has made above £200 million since 2019, before the pandemic started.
Even the least optimistic analysts think that the business will make £210 million, according to a consensus forecast it compiles.
But it has not been a period without challenge for the retailer. Burberry has long relied heavily on selling to Chinese customers – both in the country itself and Chinese tourists abroad.
China’s zero-Covid policy has weighed on the country’s shopping habits this year, although it loosened the rules on Friday as shops slashed prices for Singles Day – one of the biggest shopping days on the global calendar.
“Burberry has had a seat at the table at China’s shopping feast, Singles Day, and investors will be hoping that a sense of vitality returns to sales across this vast market given how sluggish they have been,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“It’s not just domestic demand which has been slow, hampered by ongoing lockdowns but as Burberry is highly reliant on China’s international tourists for sales, ongoing restrictions have also hurt revenues elsewhere.”
Analysts expect that Burberry will report a little over £1.3 billion in revenue for the six months, up around 9% year-on-year.
Ms Streeter said that Burberry customers will not be feeling the pinch of the cost-of-living crisis as much as those that shop at cheaper brands.
“Overall, efforts to elevate the brand into the top realms of luxury by reducing outlet activity and stopping in-store discounts have been reaping rewards but this doesn’t come cheap,” she said.
“Investing in upping its luxury cachet is set to continue so investors expecting a fast turnaround on the bottom line may be disappointed.
“Over the longer term, brand reinvigoration should help keep fashion fans loyal and Burberry’s products increasingly coveted.
“Its core customer base is also more insulated against cost-of-living headwinds, though there could still be a swing towards clothing and shoe sales, seen as more essential compared with super-expensive watches, jewellery or handbags.”