Burberry set for worst report this year as brand revival falters

Burberry Plc is expected to report yet another quarter of declining sales, as the trench-coat maker grapples with weak demand from Chinese and US shoppers. 

The British fashion house will likely reveal that its fiscal fourth quarter — which will be reported on Wednesday — is expected to be the year’s worst, according to analyst estimates compiled by Bloomberg. 

Burberry shares slumped in January after it warned on profits and the company needs to show investors it is making progress with its brand elevation strategy under new chief creative officer Daniel Lee, but analysts are casting doubt on whether that can be achieved.

There’s “limited faith” in the luxury company’s ability to revive its brand next fiscal year, Bloomberg Intelligence Deborah Aitken said. While a “tougher luxury market” and shifting trends may be further exacerbating the company’s under-performance, according to Deutsche Bank analyst Adam Cochrane.

“It is hard to pinpoint anything in particular which has gone wrong,” Cochrane writes, adding that the timing of a “big, bold new Burberry under Daniel Lee may have coincided with a period of ‘quiet luxury’ and the weakness of aspirational luxury.” 

Sales in China, a key but difficult market for Burberry, are expected to decline by 17.5% in the quarter, the most from any region. Brands undergoing creative transitions like Burberry have been impacted in China as wholesale accounts avoid untested new designers, Aitken said. She expects Chinese spending on luxury to recover later this year.