Burberry warns no-deal Brexit would lead to higher duty bill

Burberry Group Plc warned that it faces the risk of being saddled with higher costs from a no-deal Brexit, while a possible U.K. clampdown on duty-free shopping may erode revenue.

The trenchcoat maker would face “low tens of millions” of pounds in additional duties if the U.K. fails to reach a trade agreement with the European Union, Chief Financial and Operating Officer Julie Brown said on a call with reporters.

While that may affect sales, the brand is prepared for that scenario and considers it’d be in a “good position” operationally to weather any disruption emanating from Brexit, Brown said.

Another cloud on the horizon is a plan announced by the U.K. government to scrap tax-free shopping for international tourists.

“There could be a behavioral change, and tourists now could go to other EU cities where they could reclaim the VAT,” Brown said. “We’ve got a significant loss of business from Covid, then of course we could have the VAT and then the Brexit challenge.”

Brown also said that Burberry’s new pocket, lola and TB bags have been performing “extremely well.” The company is investing in the new range for the long-term and hasn’t yet passed on the full costs to consumers, Brown said.

Burberry is trying to emulate rivals like LVMH and Hermes whose leather goods units proved resilient during the crisis. That product line now represents around 20% of Burberry’s revenue.