Burberry shares drop as weak US demand overshadows China rebound

By Suban Abdulla

LONDON (Reuters) - British luxury fashion brand Burberry on Thursday reported stronger-than-expected fourth-quarter sales driven by a rebound in China but continued weakness in the United States sent its shares down sharply.

Comparable store sales at the FTSE 100 group rose 16%, accelerating from 1% in the third quarter and above a company compiled consensus of 14%, with sales in its biggest market China rising 13% in the three months to April 1.

The global spend by Chinese consumers, which is recovering after the country dropped strict COVID-19 restrictions, accounted for 30% of total business sales.

But Burberry's shares were 4.9% in mid-morning trading after the Americas remained a weak spot, with quarterly sales declining 7% in Q4.

"There's a challenge there at the moment," Chief Executive Jonathan Akeroyd told reporters, reflecting weaker spending by younger consumers, which was affecting its lower-priced categories.

Burberry also maintained its 2024 and medium-term targets while stating it was "mindful of macroeconomic and geopolitical environment".

Its shares had hit record highs in recent months on the back of optimism over the recovery in China.

“The fact Burberry hasn’t lifted its guidance for the new financial year after ... a strong set of results, and reference to ... the macroeconomic and geopolitical environment, appear to have been the trigger for some investors to take profits in the stock,” Russ Mould, investment director at AJ Bell, said.

Europe performed strongly, with sales up 27% in the period, helped by a rise in tourists from the Middle East and Americas.

Thursday's results follow creative director Daniel Lee's first collection at London Fashion week in February as well as the launch of a new logo and campaign.

The company said a new collection, which includes shoes and bags, will land in stores and online in September.

Leather goods sales were up 12% in the 2023 financial year and 15% higher in the final quarter, boosted by sales in the Lola and Frances women's bags as well as the launch of the vintage Burberry Check line.

Full-year revenues at the 167-year-old business rose 7% to 3.1 billion pounds ($3.91 billion), in line with expectations, and up from 2.83 billion a year ago.

Burberry's luxury rivals LVMH and Hermes have also reported a bounce in first quarter sales due to a recovery in China and wider Asian markets.

($1 = 0.7923 pounds)

(This story has been officially corrected to change the measure of Chinese business to 'global spend', instead of 'market share', after a clarification from Burberry, in paragraph 3)

(Reporting by Suban Abdulla; editing by James Davey, Kate Holton and Jane Merriman)