Burberry blames COVID-19 as comparable sales decline by 45% in the first quarter

Burberry Group plc (LON: BRBY) announced it comparable sales to have seen a massive 45% year over year decline in the first quarter on Wednesday. In the second quarter of fiscal 2021, the company warned, performance is likely to remain weighed due to the Coronavirus pandemic that has so far infected a little under 300,000 people in the United Kingdom and caused over 44,500 deaths.

Shares of the company opened about 5% down on Wednesday and tanked another 1.5% on market open. At £14.45 per share, Burberry is currently 35% down year to date in the stock market after recovering from an even lower £10.85 per share in March. The British high-end fashion label has a market capitalisation of £5.81 billion and a price to earnings ratio of 48.27.

Burberry forecasts an up to 50% decline in H1 retail sales

As per the company-provided estimates, its comparable sales were forecast to drop by a broader 49% in Q1 as compared to the same quarter last year. Burberry also said on Wednesday that its retail sales are likely to tank between 15% and 20% in the second quarter resulting in a much wider 40% to 50% decline in the first half of the current financial year.

At £257 million, the British luxury-fashion company generated a much lower revenue in the first quarter versus the year-ago figure of £498 million. Burberry also warned on Wednesday that an improvement in tourists flows was unlikely in the second quarter.

Its store operations, it added, will be faced with significant headwinds in the recently started quarter. Some of Burberry’s stores are still closed for the public due to the ongoing health crisis.

According to the London-headquartered company, early signs of recovery in demand were evident in June on the back of growth in South Korea and China as the Asian governments decided in favour of easing COVID-19 restrictions. The decline in comparable sales last month contracted to only 20%.

Burberry to slash its global workforce to minimise costs

Burberry also expressed plans of slashing its global workforce by 500 employees as part of a £55 million cost-saving drive in addition to its previous target of £140 million. The job cut is likely to affect roughly 4% of its workforce in the UK.

Citing the rising Coronavirus uncertainty, Burberry suspended its final dividend in May. The company had reported a 27% decline in its comparable sales in the fourth quarter.