5 months ago • 2 mins
What’s going on here?
Burberry, the British luxury giant, delivered some good news last Friday – and it’s not an update to their beloved tartan.
What does this mean?
Now that spending on high-end goods has taken a tumble, parts of the US luxury market are looking more “bargain bin” than “top shelf”. And Burberry felt that pinch last quarter, with sales in the Americas dropping by 8%. But just when all seemed lost, China – Burberry’s knight in a stylish trench coat – came to the rescue. See, despite economic headwinds, sales in the country swelled by 46%. The reason: China isn’t in lockdown anymore, and consumers are flocking to stock up on Burberry’s iconic rainwear and leather goods. Add in a solid performance in the rest of Asia, and the firm’s total same-store sales rose at the fastest clip in two years.
Why should I care?
The bigger picture: Focus on the 0.1%.
The US and China are the titans of the luxury market – so when either one stumbles, it’s pretty bad news for the sector as a whole. Still, though, it’s the lower end of the US luxury market that’s really feeling the heat, while the ultra-wealthy continue to splash out. And that’s got Burberry scheming: the firm’s now trying to push into the top end of the luxury market, and it’s pulling out all the stops to revamp its image. By year’s end, it’ll have upgraded over half of its stores – and its fresh new collections, focusing on its British roots, also aim to elevate the brand.
For markets: Stock still.
Burberry’s making the right moves. Even within the luxury space, there’s a hierarchy – and analysts have split firms into the outperformers, like LVMH and Hermès, and the rest, who are expected to lag behind. Their stock prices show the difference: while LVMH and Hermès stocks are up 28% and 35% respectively this year, Burberry’s is up just 2%.
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