London has lost half of Burberry’s tourist business — and it went to Paris
Americas +12%, China +9%, Europe −3%. The CEO wants the incoming prime minister to restore tax-free shopping: London’s tourist business has halved since 2019 while Paris is up 30%.
Burberry said conflict in the Middle East is hurting tourist spending in Europe, sending the British brand’s shares down more than 6% even though April-June sales were strong in the US and China.
Sales in the Europe and Middle East region fell 3% as fewer tourists visited Middle Eastern shopping hubs like Dubai and Europe drew fewer Asian shoppers. “Where we’re really seeing the impact is tourism,” CFO Kate Ferry said, adding that local spending was cushioning the blow elsewhere and American tourist spending was strong.
Although the Middle East accounts for only about 2% of Burberry’s sales, investors focused on the knock-on impact as the war escalated, with Iran launching fresh strikes on US military bases in the region on Friday, pushing luxury stocks down across the board.
CEO Joshua Schulman, two years into a turnaround, is focused on the two “must-win” markets of the US and China. So far the strategy is working: Americas sales rose 12% year on year on the back of new customers, and Gen Z shoppers helped lift China sales 9%. “In America, our strategy is working and we’re seeing the halo effect of our investments in the U.S. market in Europe, with the strong presence of American customers here,” said Schulman.
London is a separate story. Burberry’s tourist business in the British capital has declined by 50% since 2019, Schulman said, largely because the VAT refund scheme was abolished, and that spending has shifted to Paris, where its tourist business is up 30%. He called on incoming prime minister Andy Burnham to reinstate tax-free shopping for tourists. “While we know the new PM has a busy agenda, we would hope that restoring London as the most important shopping capital this side of the Atlantic would be at the top of his list.”
Overall comparable store sales grew 5% in the first financial quarter, in line with analysts’ expectations. Revenue, typically the smallest of the year in this quarter, rose to £455 million from £433 million a year earlier.
Burberry’s shares have fallen 18% this year but have outperformed most luxury peers as sales growth improves. The industry’s giants are hoping the US and its newly-minted millionaires from the AI boom can help revive growth after a two-year slump.