Burberry’s chief executive has warned that a lack of tax-free shopping for overseas tourists is making the UK “less competitive” and benefiting Europe.
Jonathan Akeroyd said visitors had been returning to mainland Europe, mainly Paris, Milan and Barcelona, in “bigger and greater” numbers than London, putting the UK at “a competitive disadvantage”.
“We’ve seen a big surge in British tourists spending in mainland Europe as well, which is obviously quite telling,” he said as the UK luxury brand on Thursday reported an acceleration of fourth-quarter revenue growth in China.
A scheme that allowed visitors from outside the EU to claim a VAT refund on most shopping receipts was scrapped after Brexit. Akeroyd’s remarks mirror calls on the government from other UK luxury goods retailers and lobby groups to reinstate the tax break for overseas tourists, who have been flocking to continental Europe where the perk is still being offered.
Sales to tourists were up 19 per cent in London in the last three months of Burberry’s financial year, which runs to April 1 and compared to pre-pandemic levels, but they increased by “triple digits” in Paris and were up 43 per cent in Milan.
Preliminary results showed Burberry’s revenue in the year to April 1 rose to £3bn, from £2.8bn the previous year, while adjusted operating profit rose 21 per cent to £634mn — ahead of analysts’ estimates.
Burberry’s results follow a mixed picture for rivals in the first quarter of the year. Gucci owner Kering posted underwhelming results, while Christian Dior owner LVMH last month became the first European company to hit $500bn market value thanks to a strong performance.
Akeroyd vowed to return to the “Britishness” of the 167-year-old brand when he took over in March last year, targeting annual sales of £5bn over the long-term by selling more leather goods and accessories.
“We’re very excited and pleased about the recovery in China,” he said, where growth rebounded to 13 per cent in the fourth quarter.
However, sales in the US fell 7 per cent as more customers were travelling abroad, as well as buying fewer less expensive products.
Despite the uplift in sales and profits, the shares fell almost 7 per cent to £23.51.
“The fact Burberry hasn’t lifted its guidance for the new financial year after reporting such a strong set of results and the reference to it being ‘mindful of the macroeconomic and geopolitical environment’, appear to have been the trigger for some investors to take profits in the stock,” said Russ Mould, investment director at AJ Bell.
“Investors want companies to consistently beat expectations and if they can’t do that, they will look elsewhere in the current market.”
