London — British luxury brand Burberry has reported a 34% drop in annual profit after sales fell sharply in China — its biggest market — in the final three months of last year. The company had previously warned that achieving its goal of taking the 168-year-old brand further upmarket, to become the definition of “Modern British Luxury,” had been harder than expected after demand for luxury had slowed. Sales fell 12% in the final quarter, dragged down by a 19% slump in China, and wiping out gains made earlier in the year, Burberry said Wednesday. It reported operating profit of £418 million ($526.4 million). Sales in London, its home market, declined 17%, which Chief Executive Jonathan Akeroyd blamed on a lack of tax-free shopping for tourists. “Spending by Chinese tourists at our stores in London is less than half of what it was compared to the pre-pandemic, whereas it’s more than tripled in Paris,” Akeroyd said. Sales in continental Europe rose 8% in the last quarter of 2023. Akeroyd said that, while the financial results underperformed the company’s original expectations, it had made good progress refocusing its brand. The British fashion house has lagged higher-end competitors like Hermes and Prada, which have reported increases in sales. However, the sector as a whole is still struggling. Gucci owner Kerring, Burberry’s closest rival, saw first-quarter sales decline by 10%. The world’s largest luxury group, Louis Vuitton owner LVMH, also reported weak sales in its latest quarter as spending on luxury items slowed. For Burberry, the Americas continued to be a weak spot, with comparable store sales down 12% in both the fourth quarter and the whole of 2023. Burberry hopes a wider range of products, including classic men’s and womenswear tailoring, with broader pricing will appeal to those top-end customers who continue to spend. Creative director Daniel Lee is key to the brand’s repositioning. He showed his third collection at London Fashion Week in February, which focused on the brand’s outerwear heritage.