US booms for Burberry; rainwear, polos, bags and swim all strong as Gen Z embrace the brand

Burberry delivered a Q1 trading update on Friday that met analyst expectations with CEO Joshua Schulman saying he was pleased with the company’s progress during the quarter and the momentum it’s building with its key Burberry Forward strategy.

For the first time in three years it saw growth across its womenswear, menswear, accessories and kidswear divisions, anchored by the outperformance of outerwear — which highlights the wisdom of the company returning its focus to that core category when Schulman arrived in the top job a couple of years ago.

He added that the strategy is working, and the company is attracting a broad, range of luxury customers across product categories, channels and geographies, reinforcing his confidence in the opportunities that lie ahead.

So let’s look at the details. Retail revenue in the three months to late June increased 5% on a reported basis and 4% at constant exchange rates to £455 million. Comparable retail sales increased 5% this time having fallen 1% a year ago. It operated from 1% less retail space in the latest quarter.

By region, it saw quite big variations. Comparable retail sales were actually down 3% in the EMEIA region, reflecting the ongoing impact of the Middle East conflict and lower tourist spend. Excluding the Middle East region, EMEIA declined only 1%. 

The Americas led the way with a 12% uplift, supported by local demand and broad-based customer acquisition. Greater China rose 9%, also supported by local demand and outsized growth in Gen Z customers, while Asia Pacific was up 3%. Within this latter region, South Korea remained strong, growing 11%, boosted by both local demand and tourist spend, while Japan declined by 2%, impacted by the continued decline in inbound tourists from China.

What exactly went right this time? The company called out its Portraits of an Icon campaign as bringing in new customers to the brand with a 19% increase in new rainwear customers. It also said it’s cementing its authority in outerwear and scarves with the first category up in double digits and particularly strong demand across heritage rainwear, lightweight jackets and seasonal products.

Its big focus on outerwear had led some to wonder whether Burberry was narrowing its focus too much, but it’s clearly proving to be a pathway it’s using to improve its performance in other categories. The company said it saw ready-to-wear growth in knitwear, polos and swimwear and that women’s handbags returned to growth and are attracting new customers.

Its product and pricing strategy is working, the company said, delivering value for money in a luxury context across each category and in the good/better/best price tiers. That’s another important point given how the firm’s earlier attempt to operate more narrowly in ultra-luxury failed to generate the desired results.

Importantly too, the revived strategy under Joshua Schulman hasn’t alienated the Gen Z customer that are vital to all luxury brands and the company said it saw continued customer growth overall with this particular demographic up in double digits.

It has also improved store productivity via clienteling, enhanced visual merchandising and category destinations. Building on the rollout of its scarf bars, it had launched 97 polo galleries by Father’s Day.

And as well as the momentum in its stores, e-commerce continue to show good growth with a mid-teens increase during the quarter.

Wholesale appears to be improving as well and the company said it’s been seeing “a positive response from our partners”.

To conclude Schulman was cautiously upbeat. He said that “in the full year we expect to make further progress on our financial ambitions, including delivering revenue growth and margin expansion, in line with expectations, [but] we remain mindful of the uncertain geopolitical and macro-economic environment and its potential impact on consumer confidence.”