Burberry Reigns In China, Slams U.K. Government Over Tax Free Shopping

Riding the global luxury retail wave, quintessential British brand Burberry has posted yet more stellar results, as Chinese consumers snapped up its merchandise.

But Burberry boss Jonathan Akeroyd said that although he was “very pleased” with soaring full-year revenues, he was much less enamoured with the U.K. government.

The reason? An ongoing and revived spat over the removal of tax-free shopping for international visitors to the U.K., which is seeing luxury sales leak from London to cities such as Paris and Milan.

Revenues at Burberry increased 10% to $3.7 billion in the 12 months to April, with the luxury brand’s fourth quarter turbo-charged by a rebound in its largest market China, following three years of Covid-19 restrictions.

Underlying sales rose 13% in China in Q4 and Akeroyd said revenues from Chinese nationals – both within China and overseas – had recovered to 30% of total sales, although that is still short of the 40% pre-pandemic.

Akeroyd stressed that China was “a key part of our growth ambition” and said that he was hopeful of a return of Chinese tourism to Europe.

Leather goods and outerwear did especially well in the last quarter, up 12% and 7% respectively, while operating profits hit nearly $818 million.

Burberry Store Sales Up

Store sales across all of its markets increased, with Asia Pacific rising by 2%, Europe, Middle East, India and Africa up by 27%, and the Americas by 3%, although sales fell back 7% in the U.S., as economic difficulties restricted sales of the lower-priced items favored by younger shoppers.

During the period, the retailer also opened 60 new stores and reorganized its supply chain, merchandising, and digital operations under new leaders and refocused its look following the appointment of Daniel Lee as chief creative officer.

Burberry’s brand repositioning to a more British-focused aesthetic had boosted core product categories – with sales of traditional raincoats doubling – ahead of the designer’s new products launch this Fall.

However, Akeroyd was much less happy about the U.K.’s “competitive disadvantage for global shoppers” after the government ditched a tax break for tourists.

For those who don’t follow U.K. sales tax rules closely – and why would you? – after Brexit the British government ended tax free shopping for international visitors and then, in a farcical about-face, reintroduced it in one budget only to remove it again before a diamond-encrusted cash register could ring.

Luxury retailers argue that this puts Britain at a huge disadvantage to peers such as Paris and Milan, which do have tax free rules.

Walpole Publishes Luxury Report

Industry body Walpole published its inaugural State of London Luxury report, in partnership with landlord Cadogan, Monday which claimed that the loss is “a drag on both London’s and the U.K.’s economic performance”.

Citing the impact on visitor spending, Walpole said that in 2022, U.S. visitors spent at 101% of 2019 levels in London, but at 226%, 206% and 190% in France, Spain and Italy, respectively.

“If a next-generation tax-free shopping scheme could be introduced, London’s status as the world’s number-one luxury city would be guaranteed,” Walpole CEO Helen Brocklebank said.

The return of the policy would “be a windfall for the whole UK, including London”, and would add $5.1 billion to the U.K. economy and create an additional 78,000 jobs, according to Walpole’s research.

Burberry boss Akeroyd echoed those sentiments as he said that sales to tourists had risen 19% in the U.K. in the three months to April, but had more than doubled in Paris and were up 43% in Milan.

He said: “We are celebrating the fact that we are a British luxury brand and very hopeful that when tourists come to the U.K. they are coming to Burberry. We are really hoping this [tax change] can be revisited.”