Burberry recovers its poise but growth still slows
Friday 12 October 2012
Burberry's shares strutted up 13 per cent yesterday after latest figures from the British luxury brand, which issued a profits warning last month, were greeted with relief. However, it revealed its sales slowdown has continued.
Last month the fashion house shocked the City with an unscheduled trading update citing a "material slowdown" in global sales, and its shares had fallen 26 per cent since then. But yesterday's first-half update showed sales at stores open more than a year rose 1 per cent in the three months to 30 September, well below previous double-digit growth, but better than the zero growth in the first 10 weeks of the quarter.
The growth was well behind its first-quarter growth of 6 per cent, with weak trade in the UK and a slowdown in China blamed.
Burberry's total first-half sales came in at £883m, up 8 per cent.
The shares jumped 133p to 1,136p, in what one fund manager described as a "relief rally".
China's slowdown, compared with more "robust" sales in France, Germany and Hong Kong, was blamed on government change and a drop in the lucrative "gift giving" ahead of this.
Angela Ahrendts, Burberry's chief executive, said: "In a more challenging external environment, footfall declined but brand momentum remained strong, particularly with our higher-spending luxury consumer."
London's poor performance was put down to the Olympics deterring luxury shoppers.
Stacey Cartwright, finance director, said: "There was a summer hiatus and London traffic was down during the Olympics. We had anticipated this and expect traffic to come back in the third quarter."
Burberry was boosted by the completion of a deal to take its perfume business in house.
Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said: "The underlying strengths of the company, which for the moment seem to have been dismissed by investors, remain intact and today's statement shows some strong underlying growth."
But its previous growth levels appears to be a thing of the past. Rahul Sharma at Neev Capital said: "After three years of extraordinary growth, the luxury sector is seeing growth normalise as economies around the world slow."
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