Burberry gains on optimism scrapping discounts to pay off

Bloomberg

Burberry Group Plc’s decision to eliminate discounts is showing progress as the brand aims to elevate the image of its products in the eyes of luxury consumers.
Burberry shares rose as much as 5.9%, the most in two months in London trading. The brand has been phasing out markdowns, leading to an improvement in full-price sales during its fiscal third quarter. The stock
is still down 20% over the past 12 months.
“Our communication and collections resonated well with new, younger clientele,” Burberry Chief Financial Officer Julie Brown said.
The shift in strategy led investors to overlook a bigger-than-expected 9% drop in overall retail sales on a comparable basis. A team of Morgan Stanley analysts led by Edouard Aubin said that was a “quantitative miss” but a “qualitative beat.”
Luxury companies have been facing the challenge of on-off policies that closed, then opened and then closed retailers again from October in many European countries. The measures are particularly disruptive since the industry still sells the bulk of its products in stores, with sales teams catering closely to customers’ needs, an experience that’s not as easy to replicate online.
Burberry’s performance was mixed geographically: The appetite of shoppers in Asia Pacific was strong with 11% growth but Europe, the Middle East, India and Africa saw a 37% deceleration, mainly hurt by the lack of tourists. The Americas also saw an 8% revenue decline, according to a statement.
Brown said the UK was the worst-hit country in the region in the quarter. London with its flagship stores is heavily impacted due to the lack of tourists and the absence of workers in the center of the capital, she said.