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Low Tourism Means Low Sales for Burberry

It's a lackluster time for luxury.
Burberry in Shanghai. Photo: Kevin Lee/Getty Images

Burberry in Shanghai. Photo: Kevin Lee/Getty Images

Burberry was disappointed by its sales results for the six months leading up to March 31 (the third and fourth quarters of 2016), which were down 1 percent year over year, and Chief Financial Officer Carol Fairweather told investors on Thursday that the biggest factor was decreased Chinese tourism in Europe. Sales within Asia were more promising as the brand continued to see growth in mainland China, Korea and Japan; in the latter, revenue more than doubled. However, Macau and Hong Kong are dragging sales down, the latter because of decreased footfall, which has been a problem for Burberry for the past three quarters. Globally, Burberry's comparable retail sales decreased by 2 percent over the 6 months and by 5 percent in the fourth quarter. Wholesale sales were down 1 percent. Total revenue clocked in at £1,410 million, about $2 billion.  

Christopher Bailey, chief creative and executive officer, said in a statement that the company faces "an external environment that remains challenging for luxury" but digital sales are growing. Indeed, e-commerce grew in all 44 online countries, mostly on mobile. 

Meanwhile, beauty wholesale and retail revenue increased by 13 percent, which, along with childrenswear, has shown consistently steady growth in the past. (The new Mr Burberry fragrance in particular is off to a good start.) Menswear and womenswear each declined by 3 percent, but accessories grew 1 percent as the brand's personalized scarves and ponchos continue appealing to consumers. 

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There are a lot changes in the pipeline for the British company, as it consolidates all its brands and begins a see now, buy now runway strategy in the fall. But Fairweather said these particular changes won't negatively impact the business: buyers are aware of the changing brand identity so promotional strategies will not change, and the runway collection makes up quite a small part of the business. However, Burberry does expect wholesale revenue to decline by a whopping 10 percent in the next six months because of cautious orders in the U.S. and globally, as well as increased beauty distribution. The expiration of licenses in Japan will also continue be a problem: it's already caused a 51 percent decrease in overall licensing revenue over the last six months.