Burberry has ditched a plan to revive the Temple Works mill in Leeds and delayed a decision on whether to build a new factory next door for at least another year despite a pick-up in sales.
Sales at stores open more than a year rose by a better-than-expected 4% in the three months to 30 June as Chinese shoppers began to splash the cash again. City analysts had been expecting a 2% rise, in line with the previous quarter.
Underlying sales rose by about 15% in mainland China as the chief operating and financial officer, Julie Brown, said “Chinese consumer confidence continued to build.” She said there had also been a rise in Chinese shoppers heading to Hong Kong, after a long period of decline.
The UK remained Burberry’s fastest-growing market as international travellers continued to take advantage of the drop in the value of the pound since last year’s Brexit vote to pick up a bargain.
Brown said growth had slowed from the 30% to 40% seen last year as 2017’s rise in tourist spending was being compared against the post-referendum leap from June 2016. But she said local spending remained high.
Luxury leather goods and a new lightweight version of the classic trenchcoat, designed for tropical climates, led the growth. Burberry’s backpacks were the best seller, overtaking the Banner bag.
The strong Asian sales and ongoing UK growth helped offset declines in the Middle East, the US and in some continental European areas including Italy, where Brown said Burberry faced tough competition from local luxury labels.
Despite the strong performance, Burberry said it had told Leeds city council it would not be taking up an option to redevelop the grade 1 listed Temple Mill, which was part of a £50m project to bring its textile and raincoat manufacturing under one roof.
Brown said the plan was on hold as Burberry was still considering a number of options for the future including refurbishing its existing factories in Castleford and Keighley, developing a site it owns beside Temple Mill or building on an alternative greenfield site. The redevelopment of Temple Mill itself was originally intended to follow on from the development of the factory.
Brown said the company remained committed to Leeds, where it is in the process of moving about 300 head office roles from London.
“We decided to take our time,” Brown said. “There is no pressing urgency to put money down. We are assessing our options.” She said the project would remain under review for “the next year or so”.
The arrival of new chief executive Marco Gobetti last week could well lead to a change of plan from that laid down by Christopher Bailey, the Yorkshire-born former chief executive and creative director who has now become president of the business. Gobetti is expected to address shareholders publicly for the first time on Thursday at Burberry’s annual meeting where there is expected to be debate over hefty pay packages for Bailey and Brown.
Burberry announced plans for a new Leeds factory in November 2015 and originally said it would be moving its 800 manufacturing staff there by 2018 with plans to add at least another 200 jobs.
But a year ago, the company said it had “paused” the project as it considered the impact of Brexit. On Wednesday, the company said it now employed about 1,100 people at its existing factories, which it was refurbishing. Brown said the latest delay was not related directly to Brexit but about “understanding what our priorities are as a company”.
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