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(Alliance News) - Burberry Group PLC on Wednesday reported on a painful first-quarter, sending its stock into the red, but the luxury goods firm also said it has noticed a sales recovery in China and Korea.
Burberry shares were 5.1% lower at 1,478.00 pence each in London on Wednesday morning, the worst blue-chip performer.
The company set out a series of cost saving measures but warned its second-quarter could take a hit as well from the Covid-19 pandemic.
In the 13 weeks to June 27, retail revenue slumped 48% annually to GBP257 million from GBP498 million. Comparable sales were 45% lower, compared to a 4% fall during the same period a year ago.
"In Q1, sales were severely impacted by the drop in luxury demand from Covid-19 and we expect it will take time to return to pre-crisis levels with the resumption of overseas travel," Chief Executive Officer Marco Gobbetti said.
Burberry did report a "progressive month on month" improvement during the period, however, as more of its stores across the globe emerged from closures.
In the month of June, sales growth in mainland China and Korea "was ahead of pre Covid-19 levels".
Over the whole quarter, the Asia Pacific region had a 10% sales fall, but returned to growth in June. Europe, Middle East, India & Africa had a 75% sales plunge in the first quarter. Similarly impacted by lockdown measures was the Americas region, where sales slumped 70%.
"Q1 2021 marks the start of the third year of our journey to transform Burberry. During this period, we will strengthen the foundations we have established, adapting to the current challenging and fast changing environment and positioning the brand for acceleration and growth in the long-term," the company added, though noting the "extremely difficult backdrop" of Covid-19.
"As we enter the second phase of our strategy, we are making some organisational changes. As previously announced, we are evolving our approach to product, creating three new business units covering ready-to-wear, accessories and shoes. We intend to pool expertise within each unit to enhance our product focus, increase our agility and elevate quality. We are also proposing to further streamline our office-based functions and improve our retail efficiency in certain geographies outside the UK."
Subject to a consultation, Burberry said these measures will offer savings of GBP35 million during financial 2021, with GBP55 million in annualised cost cuts. Burberry noted it will incur a GBP45 million restructuring charge to achieve this.
"These savings are incremental to our previously announced GBP140 million cumulative cost saving programme. Conditional on the macroeconomic recovery from Covid-19 and luxury industry growth, we will be able to reinvest these savings into consumer-facing activities," Burberry said.
Looking ahead to its second-quarter, the FTSE 100 firm expects the period to be "materially impacted" by the pandemic, but expects a more tempered sales decline between 15% and 20%.
It added that it expects its first half gross margin to decline by between 200 and 300 basis points annually, but operating expenses to be cut by "mid-teens percentage".
By Eric Cunha; ericcunha@alliancenews.com
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