Burberry boss calls for return of VAT-free shopping

Times

a day ago

Britain could regain its crown as Europe's No 1 shopping destination if the government brought back VAT-free shopping for tourists, according to the boss of Burberry.
Joshua Schulman, chief executive of the British luxury label, said international consumers were still 'not shopping in the UK to the extent that we would like due to the lack of a VAT refund scheme'.
He called on the UK government to reintroduce the scheme, which was scrapped in 2021 as part of the decision to leave the European Union. France and Italy have continued to benefit from the VAT schemes they offer.
Shares in the trenchcoat-maker rose almost 6 per cent on Friday after it posted its strongest sales performance in 18 months and Schulman, who joined Burberry last year, expressed 'conviction' about his turnaround plan.
He said reinstating the scheme would encourage tourism and benefit all luxury and retail brands. It would be 'a real lever for growth' and a 'great opportunity for the UK to become the No 1 shopping destination in Europe'.
It would also support British brands that have struggled to compete with international competitors since the scheme was scrapped. This has played a part in Burberry's decline, although its boss has admitted that most of its problems were of its own making.
The decision to remove the scheme, which allowed international shoppers to reclaim 20 per cent VAT on purchases, proved deeply unpopular among the UK's retail and hospitality sectors.
There have been hundreds of calls for it to be reversed, including from Helen Brocklebank, chief executive of Walpole, the official body for the UK luxury sector, who said it was a 'crazy, wrong-headed decision'.
The last Conservative government decided against reintroducing the scheme after a review by the Office for Budget Responsibility (OBR) concluded that projections it made in 2020 'still appear reasonable'. It had estimated that withdrawing the scheme would save the exchequer around £540 million per year by 2025-26, while restoring it would cost £2 billion.
The new Labour government appears unwilling to launch a new scheme. A Treasury spokesman recently said it had 'no plans to introduce a new tax-free shopping scheme in Great Britain', adding: 'Visitors can continue to claim VAT relief where the items purchased are shipped directly to their home country as exports.'
Several industry sources say they believe ministers are ignoring the effect on the wider UK economy.
A government spokesman said: 'The UK is one of the most visited countries in the world and international tourism drives billions into our economy.
'We are supporting the continued growth of this industry and will be launching a national visitor economy strategy this autumn to help meet our ambition to welcome 50 million international visitors a year to the UK by 2030.'
Music festivalgoers wishing to stand out from the crowd in Burberry wellies, scarves and jackets helped a sales recovery at the company.
Schulman acknowledged that trading remained 'challenging' and said the brand still had a long way to go. However, he pointed to progress in slowing the pace of decline in sales, as well as 'stabilisation' in its key China market.
• Why China's giving Burberry a reality check
Comparable retail sales fell 1 per cent in the three months to June 28, compared with a 6 per cent fall in the previous quarter and a 21 per cent slump a year earlier. Analysts had forecast a 4 per cent drop.
Total retail revenue declined 6 per cent to £433 million, which the company attributed in part to a 4 per cent currency headwind. On a constant currency basis, sales were down 2 per cent.
The company said demand for seasonal items such as its lightweight coats with checked trims, pool slides, silk scarves and wellies had helped support performance in the run-up to summer.
New marketing campaigns and events have played a central role. Burberry launched adverts featuring Liam Gallagher and his children Lennon, Gene and Molly Moorish-Gallagher before the Oasis reunion tour.
Schulman said Burberry had appealed to both younger luxury shoppers via festival-linked pop-ups featuring DJ sets in shopping centres — which showed a 'different side of Burberry' — and to 'elite VIP' customers, through exclusive events linked to its partnership with the King's Highgrove estate.
'We are appealing to a much broader range of luxury consumers,' Schulman said, noting the brand had started to attract 'younger, high-spending extrovert consumers who want to stand out from the crowd' as well as more traditional loyalists.
A trial of in-store 'scarf bars' proved successful, it said, with plans to roll out 200 globally.
Burberry also cited signs of 'stabilisation' in China, which accounts for about 30 per cent of sales and has been hit by macroeconomic pressures. Sales continued to fall in Asia overall, but the company said it had seen progress in the region. It also noted growth in Europe and the US, despite lower tourist numbers.
• Watch: How Burberry's check survived fashion's biggest identity crisis
Schulman was previously head of Coach and Michael Kors before joining Burberry. His plan, called 'Burberry Forward', aims to re-anchor the brand in its British roots and return Burberry to 'timeless British luxury' with a focus on outerwear. Its classic check-print coats now retail at £1,900, with signature scarves priced at £420.
Since he joined, the company's share price has gained about 66 per cent, but is still trading well below its peak as investors remain wary after several failed turnarounds under previous bosses.
Schulman admitted Burberry was still 'in the early stages of our turnaround', but said he was optimistic about its future. The business is on track to deliver £80 million of its planned £100 million in cost savings this financial year and has reorganised under four regional presidents to boost efficiency.
In May Burberry said it would cut 1,700 jobs over two years — about a quarter of its UK workforce. At the time Schulman said he was 'more optimistic than ever that Burberry's best days are ahead', despite the redundancies. He was paid £2.5 million for the year to the end of March.
The company refrained from issuing full-year guidance, citing ongoing macroeconomic uncertainty. Schulman acknowledged that the second quarter, which includes the key summer period, would be critical: 'It's a tough macro [environment] out there and we are taking things step by step, but we are optimistic about the quarters ahead and the business in general.'
Garry White, chief investment commentator at Charles Stanley, said: 'Encouragingly, Burberry's turnaround strategy — focused on product refinement, store optimisation, and digital investment — appears to be stabilising its recent poor performance.' However, he said it was 'too early to declare a full recovery in the troubled luxury sector'.
Analysts at Deutsche Bank said 'further material growth henceforth will depend largely on the company's ability to replicate the success of its core categories onto non-core segments to drive growth and profitability'.
Shares in Burberry were up 69½p, or 5.6 per cent, to £13.17½ at the close on Friday.