British luxury fashion house Burberry has issued a stark warning about its financial performance, marking the second profit warning in just three months. This news reflects a broader industry trend of slowing luxury demand, which is significantly impacting sales and revenue.
Burberry now anticipates its full-year adjusted operating profit for 2023/24 to be between 410 million pounds ($523 million) and 460 million pounds. This forecast is notably lower than their previous guidance, issued in November, which predicted profits in the range of 552 million pounds to 668 million pounds.
The downturn in luxury spending has been attributed to various global factors. The conflict in the Middle East has added geopolitical uncertainty to an already challenging situation. Inflation and economic woes in the U.S. and Europe have led shoppers to tighten their spending, while the post-pandemic rebound in China has been hampered by a property crisis.
Burberry’s retail revenue in the 13 weeks leading up to December 30 witnessed a 7% decline, totaling 706 million pounds. This downturn was marked by a 4% decrease in comparable store sales. Despite a 3% sales increase in the Asia Pacific region, including an 8% rise in Mainland China, Europe saw a 5% reduction.
Analysts have pointed out that the so-called “aspirational shoppers” are among those pulling back their luxury spending, impacting brands like Burberry that are more exposed to this customer demographic. The brand’s recent struggles illustrate the challenges faced by luxury retailers in adapting to a rapidly changing global market.
