Burberry Group Plc boosted its profitability as the U.K. trenchcoat maker benefited from efforts to make its brand more exclusive and pricey.

The luxury-goods maker said Wednesday its adjusted operating margin widened to 18.5% in the 53 weeks through April 2, up more than one percentage point. The company reiterated revenue growth should be at a high single-digit percentage in the medium term. The stock rose as much as 2.9%, trimming the year-to-date decline to 11%.

It’s the first earnings update since Jonathan Akeroyd, the former head of Versace, became chief executive officer in March. Akeroyd is expected to follow the work of predecessor Marco Gobbetti, trying to make Burberry a higher-end brand by reducing third-party distribution and eliminating discounts on Olympia handbags and tartan scarves.

“The company has made great progress over the last five years to elevate the brand,” Akeroyd said in the earnings release. “I look forward to setting out my plans for building on these strong foundations and accelerating growth at the interim results in November.”

Still, growth slowed in recent months as lockdowns in China damped business in the key luxury market, which the UK trenchcoat maker depends on more than rivals.

The industry is also grappling with weak tourism and declines in stock markets that may lead the rich to trim spending. Burberry closed its stores in Russia in March after the outbreak of war in Ukraine. 

Burberry said restrictions in China started weighing on sales in March.

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

Source:
courtesy of BLOOMBERG

by Katie Linsell

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