San Francisco Frontiers - Troubled Burberry shows sign of recovery despite sales drop

Revenue dropped seven percent to £659 million ($871 million) in the company's third quarter, covering the three months to late December, from the period a year earlier, Burberry said.

The group famed for its trench coats noted, however, that it was more likely to avoid a full-year operating loss after the sales decline was less severe than forecast by analysts.

The news sent shares in Burberry -- known also for its trademark red, camel and black check design -- soaring by around 15 percent in morning deals on London's FTSE 250 index.

Burberry exited London's top-tier FTSE 100 index in September after 15 years, with analysts citing strategic mistakes and weak demand from China.

Chief executive Joshua Schulman, appointed in July, swiftly launched a turnaround plan focused on cutting costs and selling more outerwear.

"We recognise that it is still very early in our transformation and there remains much to do," Schulman said in a statement.

The Asia-Pacific region saw Burberry's largest decline in sales during its third quarter, with turnover in mainland China dropping seven percent.

China is the world's biggest spender in the luxury sector, accounting for half of global sales.

But as the country's post-pandemic recovery falters, consumption has flagged, sending jitters across the globe.

Burberry's latest sales decline in the world's second-biggest economy was partially offset by an uplift in revenue from the Americas, it said.

Burberry had posted a net loss of £74 million for its first half, after reporting a profit for the same period a year earlier.

"Recent months have seen a sharp turnaround in performance, hinting at a much-needed comeback," Aarin Chiekrie, an equity analyst at Hargreaves Lansdown, said after the trading update.

"But there's still a long way to go... Building back brand desirability requires a lot of investment, even more patience," he said.

N.Wilson--SFF