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

Burberry reveals bumper dividend hike as looser Covid restrictions lead to healthy revival at European stores

  • Burberry proposes handing investors an interim payout of 16.5p per share 
  • Comparable store revenues grew exceptionally well in continental Europe 
  • The company’s Lola handbag was in very strong demand from customers 

Burberry has declared a dividend hike of over 40 per cent after the luxury fashion brand overcame poor trade in China to report forecast-beating results.

The FTSE 100 business proposes handing investors an interim payout of 16.5p per share, compared to 11.6p per share last year, as it revealed profits climbed by a third to £193million in the six months to the start of October.

Earnings benefited from an 11 per cent increase in reported turnover, slightly ahead of expectations, prompted by loosening Covid-related restrictions bringing shoppers back to stores.

Looking ahead: Burberry is pinning its hopes on the full recovery of its market in China 

Comparable store sales grew exceptionally well in continental Europe, boosted by a significant rebound in purchases by US and Middle Eastern tourists, with the former group taking advantage of a stronger dollar.

Burberry also noted strong growth in South East Asia, Japan and Australia, although total sales across the Asia-Pacific region still declined due to onerous lockdown policies in Mainland China.

The Americas region also reported a modest drop in revenues, yet demand remained more than 30 per cent above pre-pandemic volumes thanks to greater full-price sales and orders of handbags.

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

This luxury product helped drive sales of the firm’s leather goods in stores up by 11 per cent, while sales of outerwear apparel only increased by 3 per cent because of the lockdowns that affected major Chinese cities.

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

Over the same period, Burberry wants to boost overall sales to £4billion and grow the share of online purchases to around 15 per cent of retail trade.

Chief executive Jonathan Akeroyd, who ascended to his post in April, said he was ‘confident’ of achieving the goal, backed by the ‘very talented designer’ Daniel Lee, who joined the firm last month as creative director.

He replaced Riccardo Tisci, whose four-year tenure represented a transformational but 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 ‘refocus on Britishness and strengthen our connection with British design, craft and culture’ as part of the strategy, whose long-term goal is to deliver £5billion of revenues.

Though it acknowledged the more difficult economic backdrop and the continued impact from lockdowns in China, the business has maintained its near-term outlook.  

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

‘But Burberry’s shareholders have been here before. Previous CEO, Marco Gobbetti, was supposed to be the key to unlock Burberry’s latent potential. More than 5 years on from his arrival, investors are still waiting.

He added: ‘To challenge the likes of LVMH, some tough choices will need to be made, especially around new products. The culture probably also needs reinvigorating – with an injection of much-needed dynamism not going amiss.’

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

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