Burberry rises amid optimism for China sales recovery

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Investing.com — Burberry Group PLC (LON:BRBY) shares gained on Wednesday, adding to the stock’s recent outperformance against its peers, as investors bet that a COVID-related slowdown in Chinese sales in the third quarter would only temporarily weigh on the British fashion brand’s returns.

In a trading update, Burberry said comparable store sales in its key Chinese market – which accounts for more than a fourth of its total sales – slipped by 23% during the latest three-month period after a wave of COVID-19 cases led to “significant disruption” in the country.

Although there were signs of resilient demand outside of China, group-wide comparable store sales growth was limited to 1% year-on-year, below Bloomberg-compiled estimates of 1.43%. Total retail revenue came in at £756 million (£1 = $1.2383), also missing expectations.

“Overall, we are pleased with our performance in the third quarter as double-digit revenue growth outside of Mainland China offset the impact of COVID-19-related disruption there. Europe in particular continued to perform well, driven by strong trading over the festive period, and leather goods delivered another quarter of double-digit growth globally,” said chief executive Jonathan Akeroyd in a statement.

Akeroyd, who took over at the helm of the luxury business in 2022, added that he was confident that the firm can reach its medium-term targets of high-single-digit revenue growth despite lingering concerns over a potential global economic slowdown.

Analysts at Stifel echoed his optimism, saying they see “prospects of a sales rebound in China” in the coming months following Beijing’s recent decision to ease COVID-19 restrictions.

Burberry shares were higher by more than 2% in late morning trading, pushing its one-year change up to more than 27%.