Burberry returns to profit as sales soar, from £85 socks to £9,000 bags

CEO says ‘democratic approach’ has helped brand outperform tough market, with big rises in China and US

Burberry has returned to profit as its back to basics strategy drove strong sales of the British brand’s coats, jackets and handbags over the summer.

Joshua Schulman, the chief executive, said the luxury brand had outperformed a “challenging luxury market” to achieve sales growth of 6%, helped by strong online and wholesale sales particularly in China and the US. “Our strategy is working,” he said.

Burberry said it made a pre-tax profit of £19m in the six months to 26 September after a loss of £48m a year before, as sales rose to £1.1bn. Sales rose 15% in China and 14% in the Americas but fell 1% in the Europe and Middle East region, partly due to the Iran war.

Schulman said Burberry’s focus on a “pyramid of pricing” ranging from more “affordable” scarves, starting from £195, and cotton-cashmere socks from £85, to its top-tier bags and coats, which can cost more than £9,000 for a leather version, had helped it achieve growth despite a tough market. Wealthy shoppers around the world are travelling less and being more cautious about spending, hitting luxury brand sales globally.

Sales of lightweight jackets and “tropical” gaberdine raincoats as well as its Cotswold range of leather bags and accessories featuring the brand’s famous check had proved popular.

Schulman said: “Luxury customers around the world are experiencing some fatigue with exorbitant pricing and in this context our strategy of having great value for money is resonating strongly with Chinese customers.”

“Burberry has always had a somewhat more democratic approach than some of our European peers and has a universal appeal,” he added.

Schulman said Burberry has spent the last two years of its Burberry Forward strategy returning to its historic position at the “sweet spot in the luxury market.”

He said investment in locally relevant marketing, such as special product for China’s Valentine’s Day celebrations this spring and for the upcoming lunar new year, were also helping drive sales.

“It is no secret global tourism is down but the local customer has been spending in their respective regions,” he said. “This is a trend we have been seeing all year long.”

While people were spending less as tourists which was hitting sales in discount outlets, Schulman said local spending was holding up in its flagship city centre stores including in London.

He said that while “nobody has a crystal ball” about whether customers would begin spending more freely, history suggested “this is a very cyclical business”.