Burberry turnaround hopes boosted by US holiday shoppers

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 shares jumped 12% as investors welcomed the sign of improving demand, adding to hopes that luxury shoppers' confidence is returning. Shares in luxury conglomerate Kering also gained 8%, 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 cashmere scarves, priced between 420 and 990 pounds ($522-$1,230), as well as outerwear, 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 and Brunello Cucinelli recently could help make investors feel more optimistic that luxury demand is improving, helping turnaround stories like Burberry.

SALES IMPROVE ACROSS REGIONS

Schulman said New York, where the brand opened a refurbished store on 57th Street featuring "uber-luxe" coats, performed well, helping sales in the Americas grow 4% in the quarter.

Burberry has stretched prices of its most expensive products in the U.S., like a $13,900 women's trench coat with mohair wool trims, reflecting better luxury demand there, Luxurynsight data shows.

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.

Ferry said there were signs of stabilisation in consumer demand in China, a key market for the brand which opened a new store in Beijing in November. Mainland China accounted for about a fifth of Burberry's total revenue in its last financial year.

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 its first half.

Third-quarter retail revenue was 659 million pounds ($818 million), down from 706 million pounds in the same quarter a year earlier.

With Burberry set to present its Autumn/Winter 2025 collection at London Fashion Week on Feb. 24, rumours continue to swirl around how long creative director Daniel Lee will stay with the brand, with an Italian newspaper this week reporting he plans to join Jil Sander.

Both Schulman and Ferry, asked by journalists and analysts whether Lee was leaving, said they don't comment on speculation.

($1 = 0.8074 pounds)

(Reporting by Yadarisa Shabong in Bengaluru and Helen Reid in London. Editing by Mark Potter)