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Burberry reports record profit despite slowdown in China

The British luxury brand, known for its beige checks and signature trench coats, reported a 23% increase in revenue for the year, while its profits rose 38% to £523m ( $649 million).

Burberry shares, down more than 12% this year, edged higher on Wednesday in London.

Strong earnings come with a cautious outlook for the Chinese market, where sales fell 13% in the last quarter and where “about 40%” of the company’s distribution is disrupted by Beijing’s strict Covid-19 lockdowns, Burberry chief financial officer Julie Brown said in an earnings call. “We expect a rebound in China once the restrictions are lifted.”

The slowdown in China coincided with shutdowns that began in March, which weighed on sales after an otherwise strong year. Burberry said its full-price business in mainland China was up 54% overall from two years ago.

“Our outlook depends on the impact of Covid-19 and the rate of recovery in mainland China consumer spending,” the company said in a statement.

Lockdowns in China, the world’s second-largest economy, have caused massive supply chain disruptions and affected consumer spending. Retail sales in the country fell 11% in April from a year ago, according to government data.

Barclays analysts were generally positive about Burberry’s performance, but pointed to the importance of China.

“Burberry, alongside the rest of the sector, is unlikely to regain any momentum until we have more visibility on the Chinese lockdown,” as well as inflation and the potential for recession, the analysts said. analysts in a note.

It was a big revenue call for the brand’s new CEO, Jonathan Akeroyd, who took the helm in March. His predecessor, Marco Gobbetti, resigned in January after resolutely repositioning the brand in the luxury category.

When Gobbetti announced his departure in June last year, halfway through the brand’s strategic turnaround, shares fell and analysts wondered whether a new CEO would stay the course or attempt another pivot.

During Wednesday’s call, Akeroyd focused on maintaining brand momentum and accelerating growth.

“The ambition to be true luxury remains entirely on point, and that will create the most sought-after brand value and ultimately the most sustainable and profitable business,” Akeroyd said.

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