By Helen Reid and Yadarisa Shabong
(Reuters) -Burberry reported a smaller than expected 4% drop in quarterly comparable store sales on Friday, helped by a stronger holiday season in the United States, an encouraging step in the British luxury brand’s turnaround efforts.
Burberry (LON:) shares jumped 16% as investors welcomed the sign of improving demand, adding to hopes that luxury shoppers’ confidence is returning. Shares in luxury conglomerate Kering (EPA:) also gained 10%, while sector leader LVMH was up 3%.
Burberry CEO Joshua Schulman, who took over at the struggling brand six months ago, said its festive advertising campaigns, which highlighted its trademark trench coats and scarves more than bags and shoes, resonated with a broad range of customers.
“We are extremely pleased with the results,” Schulman told journalists on a call. “We have seen new customer growth in the month of December for the first time in over two years, and we’ve seen an increase in the brand desirability as well.”
Schulman’s strategy is to put the focus on Burberry’s best-known products to win back customers he said were alienated by less recognisable designs and higher prices. The company said outerwear and scarves outperformed globally.
Analysts had expected a 12% decline in comparable sales for Burberry’s third quarter, which runs to Dec. 28.
“We view these results as a first (and early) step in the right direction,” RBC analysts said in a note.
Analysts at Citi said the strong sales reported by Richemont (SIX:) and Brunello Cucinelli recently could help make investors feel more optimistic about luxury turnaround stories like Burberry.
SALES IMPROVE ACROSS REGIONS
Sales in the Americas grew 4% in the quarter as Burberry said New York, where the brand opened a refurbished store on 57th Street, performed well.
Other regions also delivered an improvement in sales from the previous quarter. Asia Pacific sales were down 9% after a 28% decline in the second quarter, while Europe, Middle East, India and Africa (EMEIA) sales were down 2%, against a 10% fall previously.
Burberry’s chief financial officer Kate Ferry said markdowns launched in December had contributed to improving sales and helped clear stock, but that full-price sales were also encouraging.
The company said it was now more likely that it would make a profit over its financial year, expecting to offset the adjusted operating loss of 41 million pounds ($51 million) it reported in the first half.
Third-quarter retail revenue was 659 million pounds ($818 million), down from 706 million pounds in the same quarter a year earlier.
($1 = 0.8074 pounds)
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