Burberry issues profit warning on weak holiday sales

British luxury fashion brand Burberry (BURBY) issues its second profit warning to investors in just three months, citing weak holiday sales. Burberry shares have fallen by 7% in Friday's morning session.

Yahoo Finance Retail Reporter Brooke DiPalma details Burberry CEO Jonathan Akeroyd's statements pointing to slowing demand for luxury goods. She also highlights what to expect from the National Retail Federation 2024: Retail's Big Week expo in New York City next week.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Luke Carberry Mogan.

Video transcript

BRAD SMITH: Shares of Burberry hit after the high-end retailer slashed its profit forecast after weak holiday sales. The profit warning is the brand's second in three months, a sign that luxury demand is in for a tough 2024 perhaps. We're here with more-- joined by "Yahoo Finance's" Brooke DiPalma. Hey, Brooke.

BROOKE DIPALMA: Good morning, Brad. This is certainly yet another setback for the Burberry brand as the luxury retail brand continues to move forward with its new strategy to really broaden its appeal through more modern, luxury aesthetic and lean into its British roots. It's now under the creative guidance of English fashion designer, Daniel Lee. His first collection launched in September.

But Burberry-- not immune to the ongoing consumer environment where they continue to tighten their wallet and pull back on these luxury goods. And in the release, Burberry's CEO, saying that the company is "continuing to deliver the transition to our new modern British luxury creative expression for Burberry," but he said it has become more challenging against that backdrop of a slowing luxury demand.

The company now expects adjusted operating profit for the fiscal year to come in between $523 million to $587 million. Now that is down from the previous guidance of $704 to $852 million, its fiscal year does end March 30th. This demand is being led by a slower demand here in the Americas, down 15%, followed by Europe, the Middle East, India, and Africa, down 5%, and Asia-Pacific sales, they're up 3%. But what we continue to see there is a softer demand post COVID in China.

SEANA SMITH: Brooke, how does the results that we're seeing from Burberry-- how does that stack up to some of the other luxury retailers within this space? Or are they seeing similar trends?

BROOKE DIPALMA: Yeah, well, it's certainly been a tough year for LVMH. Of course, that's behind Christian Dior, Fendi, Louis Vuitton. They were driven lower by sales here in the US after exceptional growth during pandemic. And what we're really learning here is that post pandemic, we saw a meaningful growth story for the luxury market, but now we're seeing a bit of a pullback.

And when I spoke to the luxury retail CEO of Neiman Marcus, he said that the luxury market is experiencing a normalization. And it's really led by this aspirational consumer. What we're seeing here is consumers waiting for the right time and the right price to act on purchasing these luxury goods.

BRAD SMITH: And Brooke, we're also going to hear more this week and from some of the biggest names in retail as well. What are we expecting? What's going to come forward? And you're going to be tracking all of this.

BROOKE DIPALMA: Yeah, well, we'll certainly be at the NRF conference this coming weekend. The NRF Expo is setting down here in New York City. And last year, more than 35,000 attendees went there. There was more than 6,000 brands presenting. We're also expecting a similar turnout this year.

And really some key themes that we expect this year is navigating this uncertain environment, the future of retail, I'm sure. AI will come up many, many times. But really, the evolution of luxury is something that I'm going to be keeping a close watch on, as well as-- among many other topics, I'm eager to hear what these execs have to say about the state of the consumer and what they expect for 2024.

BRAD SMITH: It's a really fun event as well. I mean, there was some technology that was showcased last time I went there that really showed off the kind of picking and packing-- so there is like the robotics element, there's also the big brands, and the CEOs that make their way there. But there's a big technology aspect to this as well. It's going to be interesting.

BROOKE DIPALMA: Lots of investment in automation in the past year. And so I expect that to move forward. I'm sure it will be a big topic as well.