(Bloomberg) --
Burberry Group Plc shares fell more than 7% after a slowdown in the Americas overshadowed a rebound in China as the country reopened after the pandemic.
The British fashion brand’s stock is on track for its biggest drop since March 2022 after it said demand for sneakers and entry-level products is softening among younger Americans. The poor performance there, which was also driven by more Americans traveling abroad and reducing local spending, offset a resurgence among Chinese shoppers who are crucial for the brand.
It took the shine off a 7% growth in overall comparable store sales in the year to April 1, which was ahead of expected growth of 5.6%.
Chief Executive Officer Jonathan Akeroyd took over the running of the trench-coat maker more than a year ago promising to revive excitement in the brand. He has since named a new designer, Daniel Lee, whose debut collection in February sought to reassert the “Britishness” of Burberry.
The label was previously led by an Italian duo whose plan was to elevate the prestigiousness of Burberry in the eyes of consumers. While Akeroyd has said he will continue on this path, which had boosted Burberry shares this year before Thursday’s selloff, he also wants to boost revenue by selling more accessories and bags in the long term.
Read more: Burberry Tries to Make Britain Cool Again With Tartan And Whisky
Lee’s creations will be available in stores from September, and Akeroyd said the reception from wholesalers had been positive.
Akeroyd said he’s pleased with the recovery in spending by luxury-hungry Chinese consumers, both at home and abroad, who have long been an important customer for Burberry. Chinese shoppers currently represent about 30% of total sales, which is still lower than 40% pre-pandemic, he added. And while some Chinese tourists are returning to Europe, Burberry isn’t expecting a return to normal travel patterns in the current fiscal year. Chinese tourists are staying mostly in Asia at the moment, he said.
Burberry’s performance follows a mixed picture for luxury rivals in the first quarter of this year. Christian Dior owner LVMH Moet Hennessy Louis Vuitton SE, Hermes International and Prada SpA powered ahead while Gucci parent company Kering SA struggled.
Luca Solca, analyst at Sanford C. Bernstein said Burberry is one or two steps behind in all areas of its performance, with a faster decline in the USA and more muted profit, he added. Adjusted operating profit for the year rose to £634 million ($790 million), beating estimates.
Burberry’s performance is not good enough, said Carole Madjo, an analyst at Barclays. “We expect the deteriorating environment in the US to be a focus.”
(Updates with CEO comments throughout)
