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Burberry, luxury retail stocks slide amid China concerns, slowing US sales (OTCMKTS:BURBY)

Burberry store in London

zodebala/iStock Unpublished via Getty Images

Shares in luxury retailers Burberry (OTCPK:BURBY), LVHMH (OTCPK:LVMHF) and Richemont (OTCPK:CFRUY) all fell sharply after some worrying signals in the former’s earnings report.

While Burberry (OTCPK:BURBY) reported a hit to earnings per share for the quarter Revenue missed targetadding to concerns about slowing North American sales and lockdown-hit numbers in China.

For the latter, CEO Jonathan Akeroyd blamed much of the sales decline in Asia on health restrictions in China.

“Regarding the current trade situation or the current situation in China, we are currently finding that about 40% of our distribution in China is disrupted, either by store closures or by people not going out because of the city’s lockdown,” he said on Friday to analysts. “Obviously, like most people, we don’t know when it’s going to end.”

Sales were not optimistic for America either. Revenue fell 4% in the region from 2021, with inflation concerns beginning to weigh on sentiment. This factor also prevents management from enforcing as many price increases as it would otherwise be inclined to encourage.

“The world is suffering from a lot of inflationary pressures right now,” acknowledged Akeryord. “So we see opportunities for selective price increases, but we will be very cautious and work with the merchandising team to decide where to offer it.”

General concerns about China’s outsized impact on luxury retailers, as well as the impact of inflation even at the higher end of the income spectrum, seeped through to the stocks that populated the space. Shares in Burberry (OTCPK:BURBY) fell 4.88%, Cartier parent Richemont (OTCPK:CFRUY) slumped 5.28% and LVMH (OTCPK:LVMHF) slipped 1.42 during Friday trading % away.

Certainly there were some notable positives in Burberry’s (OTCPK:BURBY) report. Burberry sales in Europe rose significantly, with comparable store sales up over 47%. American tourists were cited as a prominent tailwind given USD-EUR dynamics.

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Russell Falcon

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