Luxury brand Burberry reported its profits fell by more than a third as sales fell in China and US, its biggest markets.

The brand admitted its ambition to take the 168-year-old brand further upmarket, to become the epitome of “Modern British Luxury”, had been harder than expected after demand for luxury slowed.

Overall annual sales were down by 1 per cent compared with the previous year, but a sharp drop off in sales, particularly in the US where they fell by 12 per cent across the whole year as well as a 19 per cent decline in the key Chinese luxury market, it said.

It reported adjusted operating profit of £418m, down from £634m a year earlier. Revenues fell by 4 per cent to £2.9bn.

Chief executive Jonathan Akeroyd said that while the financial results underperformed the company’s original expectations, it had made good progress refocusing its brand.

“We are using what we have learned over the past year to fine-tune our approach, while adapting to the external environment,” he said, adding that he remained confident in the strategy.

Mr Akeroyd said Burberry expected the first half of its current financial year to remain challenging, but it expected to see the benefit of the actions it was taking from the second half.

Creative director Daniel Lee is said to be key to the brand’s repositioning. He showed his third collection at London Fashion Week in February, which focused on revamping the brand’s outerwear. Last year it also refurbished its flagship Bond Street store in central London and said it had added 79 new or refurbished stores, which left over half its network of stores now upgraded to the new style.

Experts suggest Burberry may need to mute its famed bold tartan check as designers pursue the “quiet luxury” look said to have been inspired by the Roy family in the hit television series Succession.

So-called “quiet wealth”, also dubbed “stealth wealth”, refers to elegant, timeless clothing styles which look expensive without displaying any link to a high-end brand. Experts say it is a deliberate break from the ever-present branding and promotion seen on social media by celebrities and influencers. 

Burberry has lagged behind rivals such as Prada and Hermes which reported increased sales in the period but points to the fact the wider sector as a whole is still struggling. Gucci owner, Kering, one of its closest rivals, saw first quarter sales fall by 10 per cent while the world’s largest luxury group, Louis Vuitton-owner LVMH also reported weak sales as spending on luxury items slowed.

Victoria Scholar, investment head at Interactive Investor, said: “Burberry has been hit hard by the luxury industry’s global slowdown, hurt by slower demand from Chinese tourists and US shoppers. Those pressures look set to endure across the first half of this financial year for the trench coat maker.

“The shift away from bold patterns like the tartan check that Burberry is best known for towards much more discreet ‘quiet luxury’ trends instead has hurt the luxury brand which is struggling to find favour among the fickle fashionistas.

“The luxury industry more broadly tends to be highly correlated with the strength of the Chinese economy, given that shoppers in China typically account for around a third of global sales. And with the world’s second largest economy facing pressures from its ailing real estate sector and a sluggish emergence from the pandemic, Burberry is intensely feeling the squeeze.”