Burberry’s sales growth slowed significantly in the second quarter, as trading conditions became much more challenging. This is not a great surprise. Having splurged on luxury goods in the wake of the pandemic, wealthier consumers are now tightening their belts meaning the whole sector is starting to feel the pinch.
Chinese consumers are vital for the luxury sector but spending from this cohort appears to be slowing. China’s economy is struggling, with its real estate sector in a fine mess and this appears to be filtering through to Chinese consumer sentiment.
The American consumer also remains weak with Burberry’s Americas sales down 10% in the second quarter. This reflects a combination of weaker trading conditions and historically weak operational execution in the region. Improving performance here is a key priority for new CEO, Jonathan Akeroyd and will take time to judge. For now though, it remains a problem child.
While the long term outlook for the luxury sector remains positive, trading conditions are tough right now and appear to be getting tougher. This means the near term outlook for Burberry and its peers are murky at best.