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Q4 like-for-like sales slump 12%, China down 19%
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Annual operating profit falls 34%
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Groups says it will focus on British classic
LONDON, May 15 (Reuters) - Burberry said on Wednesday it would increase its focus on classic designs like trench coats after a sharp fall in sales in the fourth quarter when stores featured new designer Daniel Lee's collection of more expensive runway fashion.
The British group's results lagged those of rivals Hermes and Prada, underscoring a trend that only the higher end of the luxury market had held up against a wider slowdown in the sector.
Its shares, which have more than halved in the last year, were down 4%.
Burberry has been trying to move upmarket under its latest banner of "Modern British Luxury", with references to the brand's 168-year-old heritage, dressing the English upper class.
Results published on Wednesday showed the extent of the challenge facing Chief Executive Jonathan Akeroyd, with fourth-quarter like-for-like sales slumping 12% and annual profits down by 34% to 418 million pounds ($526 million).
Akeroyd said he remained confident in the group's strategy, and Lee's vision, but the group was "rebalancing" its offer.
"When you launch a new aesthetic, as we did in September, you have to put a marker down," Akeroyd told reporters. "But there are learnings that come from that."
Lee's first runway collection, launched with fanfare, featured his signature bold colours and a departure from Burberry's classic camel, red and black check print.
"The jury's still out as to whether Daniel Lee's brand aesthetics can lead to stronger commercial success and double-digit growth in a polarised demand environment," analysts at Citibank said in a note to clients.
TIMELESS CLASSICS
Burberry's like-for-like sales fell 12% in the final quarter, dragged down by a 19% slump in China, and wiping out gains made earlier in the year.
Akeroyd said the results underperformed the company's original expectations, and the first half would be challenging, but the benefit of the actions he was taking would be felt in the second half of its financial year.
Burberry hopes a wider range of products, including classic men's and womenswear tailoring, with broader pricing will appeal to those top end customers who continue to spend, including at top brands like Hermes and Prada.
"We are continuing to refine our storytelling, incorporating more of the timeless classic attributes that Burberry is known for," he told reporters.
The Americas continued to be a weak spot for Burberry, with comparable store sales down 12% in both the year and in the fourth quarter.
Sales in Europe, which had been improving, also fell in the final quarter, recording a 3% drop.
Sales in London, its home market, declined 17% in the fourth quarter, which Akeroyd blamed on a lack of tax-free shopping for tourists. Sales in continental Europe rose 8%.
"Spending by Chinese tourists at our stores in London is less than half of what it was compared to the pre-pandemic, whereas it's more than tripled in Paris," Akeroyd said. (Reporting by Paul Sandle and Suban Abdulla; Editing by Kate Holton and Emelia Sithole-Matarise)
