Burberry Group PLC’s (LSE: BRBY) shares tumbled nearly 9% during early trading on Thursday following the release of the luxury fashion house’s half-year results.
In the initial six months, like-for-like sales in Burberry stores exhibited a commendable 10% rise. However, this growth sharply decelerated to a modest 1% uptick in the second quarter.
The adjusted operating profit, excluding currency fluctuations, saw a marginal increase of 1%, reflecting the demanding nature of current trading conditions.
In response to these challenges, Burberry revised its annual revenue outlook downward, falling below initial expectations. Profit projections are now anticipated to align with the lower end of consensus expectations.
Charlie Huggins, Manager of the Quality Shares Portfolio at Wealth Club, noted that the sales slowdown in Q2 was expected. Affluent consumers, having indulged in luxury purchases post-pandemic, are now exhibiting more restrained spending habits, impacting the entire luxury goods sector.
While Chinese consumers are pivotal in the luxury sector, their spending seems to be tapering off. China’s economic struggles, exacerbated by issues in the real estate sector, are now influencing consumer sentiment.
Burberry’s Americas sales saw a 10% decline in the second quarter, reflecting a combination of weak trading conditions and historical operational challenges in the region. New CEO Jonathan Akeroyd is prioritizing improvements in the Americas, but tangible progress will require time.
Despite the positive long-term outlook for the luxury sector, current tough trading conditions, especially in key markets like China and the Americas, create uncertainties for Burberry and its industry peers.
Year to date, Burberry shares have experienced a significant 21% decline, with a 20% decrease compared to the same period last year.
