Burberry announces 42% dividend rise on back of revival in European sales

Burberry has announced a dividend increase of more than 40 percent after the luxury fashion brand overcame poor trading in China to report its forecasted results.

The FTSE 100 business is proposing to give investors an interim payout of 16.5 pence per share, compared to 11.6 pence per share last year, as earnings rose by a third in the six months to early October to £193 million.

Earnings benefited from an 11 percent increase in reported sales, slightly more than expected, following the easing of Covid-related restrictions that brought shoppers back to stores.

Comparable store sales grew exceptionally well in continental Europe, driven by a significant recovery in tourist purchases from the US and the Middle East, with the former group benefiting from a stronger dollar.

Burberry also recorded strong growth in Southeast Asia, Japan and Australia, although overall sales in the Asia-Pacific region continued to fall due to heavy lockdown policies in mainland China.

The Americas region also reported a modest decline in sales, but demand remained more than 30 percent above pre-pandemic volumes on the back of increased full-price sales and handbag orders.

Burberry noted particular interest in its signature Lola handbag, which was the centerpiece of a major advertising campaign featuring supermodels Bella Hadid and Jourdan Dunn.

This luxury product helped boost the company’s in-store sales of leather goods by 11 percent, while sales of outerwear only increased by 3 percent due to the lockdowns that hit major Chinese cities.

Under a new strategy announced on Thursday, the London-based group said it aims to double sales of leather products, shoes and women’s ready-to-wear and increase outerwear products by half in the medium term.

Over the same period, Burberry aims to increase total sales to £4 billion and grow the share of online purchases to around 15 per cent of retail sales.

Chief executive Jonathan Akeroyd, who took up his position in April, said he was “confident” to achieve the goal, backed by “very talented designer” Daniel Lee, who joined the company last month as creative director.

He replaced Riccardo Tisci, whose four-year tenure marked a transformative yet challenging time for the fashion house given the negative impact the Covid-19 pandemic had on the global apparel sector.

Burberry said Lee would spearhead a “renewed focus on Britishness and strengthening our connection to British design, craft and culture” as part of the strategy, the long-term aim of which is to generate £5bn in revenue.

While acknowledging the tougher economic situation and the continued impact of China’s lockdowns, the company maintained its near-term outlook.

Charlie Huggins, head of equities at the Wealth Club investment service, said: “A new CEO and creative designer could be just the tonic Burberry needs.

“But Burberry shareholders have been here before. The previous CEO, Marco Gobbetti, would be key to unlocking Burberry’s latent potential. More than 5 years after his arrival, investors are still waiting.

He added: “To challenge LVMH there will be some tough choices to make, especially around new products. The culture probably also needs a new impulse – with a much-needed dynamism that cannot be missed.’

Burberry Group Shares were up 0.55 per cent on Thursday morning to £20.14, meaning their value has risen by about a quarter over the past six months.