Burberry profits slump by 40% as demand for luxury goods slows

Last Updated: June 10, 2024By
Burberry’s Big Drop: What Happened?

Burberry, the fancy UK fashion brand, has seen its profits drop by a whopping 40% in just one year. This drop is part of a bigger trend where people aren’t spending as much on luxury goods, especially in places like Asia and the Americas.

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A Tough Year for Burberry

Burberry shared their preliminary results for the year ending on March 30th. They made a pre-tax profit of £383 million, which sounds like a lot, but it’s much less than the £634 million they made the year before. Sales worldwide went down by 8% in the second half of the year.

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What’s Next?

Burberry said they’re expecting the first half of next year to be tough too. They plan to keep spending money on things that make customers happy but will also try to save money where they can.

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Back in January, Burberry warned that their profits would be between £410 million and £460 million for the year. They blamed this on people having less money to spend and higher interest rates. The real number ended up being £418 million.

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Stock Market Reactions

When the news came out, Burberry’s stock price dropped by 3% at first but then recovered a bit to be down 1.5%. If you look at their shares from last year, they are down by 53%.

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Breaking Down the Sales Drop

Overall, Burberry’s sales fell by 1% compared to last year, but the second half was much worse with an 8% drop. The Americas saw a huge drop in sales, down 14% in the second half and 12% for the whole year. In Asia and the Pacific, sales were up 3% for the year but dropped 7% in the second half. The main problem was China, where sales plunged by 19% in the last quarter of the year.

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Other Luxury Brands Are Struggling Too

Burberry isn’t alone in this struggle. Mulberry, another British luxury brand, reported a 4% drop in sales, blaming it on less spending in the UK and Asia. In March, Kering, the group behind Gucci, also warned about lower profits because of fewer sales in China.

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Expert Opinions

Yanmei Tang from Third Bridge said, “Burberry is one of the brands hit by the slowdown in luxury spending. Wealthy shoppers are being more careful about what they buy. Burberry is having a hard time making their brand stand out and their sales are suffering because of it. They’re depending too much on new creative ideas instead of fixing how they run things.”

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Burberry’s Response

Jonathan Akeroyd, Burberry’s CEO, said, “It’s been tough to stick to our plans with luxury demand slowing down. Even though our results didn’t meet what we originally hoped for, we’ve made good progress in updating our brand image, improving our products, and strengthening how we sell them. We’re confident that Burberry can be the top modern British luxury brand and that we can get through this challenging time.”

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Overall, it’s clear that Burberry is facing some big challenges, but they’re working hard to turn things around. Will they succeed? Only time will tell.

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