Burberry's Rebound Crawls After China Sales Falter

Burberry's sales flatlined in the second quarter due to bad weather and COVID-19 travel restrictions in China, taking the shine off the fashion brand's better than expected profit, Paul Sandle reported for Reuters.

Photo Insert: Burberry needs a country or product to save the day - to help make up losses incurred due to dismal sales in its biggest market.

Shares in the company fell as much as 10% in early Thursday trading, giving up the gains they have made since mid-October after it reported flat like-for-like second-quarter store sales compared to two years ago, before the pandemic struck.

Chief Financial Officer Julie Brown said footfall in China dropped in August but it recovered in September and October was in line with expectations.

China is Burberry's biggest market, and growth in the country, along with South Korea and the United States drove its revenue to pre-pandemic levels in the first half of its financial year.

Worries about the strength of China's economy and an initiative to redistribute wealth, named "common prosperity" by President Xi Jinping, have hit the luxury sector. Brown, however, said Burberry had seen no sign of a drop in demand, aside from the disruption seen in August.

"Our market tends to be the upper-middle class and we are actually finding that momentum has continued," she said. Trading in Burberry's home market and elsewhere in Europe "remained difficult" due to low tourism, Brown said, with first-half sales down 31% from two years ago.

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