Burberry's profits plunge as sales slump on slowing luxury demand

By Louis Goss

Burberry on Wednesday said the slowdown in the luxury goods market hit its sales in the final quarter of 2024 and led to a sharp 34% drop in its full-year profits.

The British fashion house reported a 1% drop in its full-year revenue, to GBP2.97 billion ($3.74 billion), as higher group-wide sales in the first half of the year were pulled down by a sharp 12% drop in its fourth-quarter sales.

Burberry, which is currently seeking to revitalize its business through a far-reaching turnaround plan, saw its adjusted operating profit fall 34%, to GBP418 million, as higher rent and utility costs saw its margins drop from rates of 20.5% in 2023 to 14.1% in 2024.

Shares in Burberry (UK:BRBY), listed on the London Stock Exchange, fell 3% on Wednesday having lost 54% of their value over the previous 12 months.

Looking ahead, Burberry said it now expects it will start seeing the benefits of its turnaround plan in the second half of 2025, even as it expects the first half of the financial year will "remain challenging" and said it expects its wholesale sales to drop by 25% in the first half of 2025,

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown said that while "Burberry's brand repositioning has come a long way, it's not yet sharp enough to slice through to the core of the even more resilient end of the luxury market."

Third Bridge analyst Yanmei Tang said Burberry's position in the mid-market had seen it take a greater hit compared to rivals as high end customers have started to "become pickier about what they buy."

The British firm's heavy reliance on wholesale sales to increase its revenue threatens to worsen the situation, having already "harmed the brand's image and margins," Tang said.

The London-headquartered company saw its Asia-Pacific sales plunge by 17% in the fourth quarter of 2024, driven by 19% lower sales in China and 17% lower sales in South Korea.

This slump was partially offset by strong growth in Japan, where Burberry's sales increased by 25% throughout the year and by 18% in the fourth quarter, on the back of higher demand from tourists.

The 167-year-old fashion house also reported a 12% drop in its full-year sales in its Americas segment, as it experienced "broad-based decline" in the region in all four quarters of 2024.

This slowdown in the Americas offset a slight 4% increase in sales from Burberry's Europe, Middle East, India and Africa division, driven by higher demand from tourists.

-Louis Goss

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05-15-24 0517ET

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