Burberry sales slow as luxury sector starts to feel the impact of global economic crisis
The company was hit by a 5 per cent drop in licensing revenue
Thursday 12 July 2012
The first signs that the luxury sector may not be immune to the global economic crisis came yesterday with British success story Burberry revealing a slowdown in sales growth.
Total sales came in at £408m for the three months to the end of June, showing an underlying increase of 11 per cent. That is down from 15 per cent in the previous quarter and below analysts' forecasts of 13 per cent.
The shares fell 7 per cent to 1,189p and its chief executive Angela Ahrendts admitted the company was facing a "more challenging external environment".
The sales slowdown came as Burberry confirmed its new flagship store on Regent Street will miss the Olympics. It will not open until September, having been earmarked to open during the summer.
The luxury sector is beginning to show signs of the impact of Europe's debt crisis and slower growth in emerging markets, including China.
Stacey Cartwright, chief financial officer at Burberry, said: "This is a robust performance. We were up against tough comparisons. But we have a huge amount of brand momentum and we are in line, or better than peers."
Bethany Hocking, an analyst at Investec, said: "We expect Burberry's shares to suffer today. We note, however, that full-year guidance appears unchanged and the first quarter is Burberry's smallest quarter. It is also against the toughest comparisons."
Burberry has been putting its house in order, tidying up messy licence agreements in Japan and focusing on a "legacy clean-up", getting rid of cheaper product lines and selling less through discount outlets.
This has had an impact on sales, Ms Cartwright said, but would mean its margins had improved.
She added that Burberry had been "eliminating the non-British-made outerwear at the lower price points" and focusing on "weaved, British-made fabrics".
Despite being hit by a 5 per cent drop in licensing revenue, shop sales rose 14 per cent to £280m and comparable store sales were up 6 per cent.
Ms Cartwright said the focus remains on "global flagship markets" and the company will continue to open giant stores in key markets, where "luxury travelling consumers" continue to visit and spend.
Growth came from the UK, France, Germany and China, and several new stores are due to open this year, include in London, Chicago, Hong Kong and Shanghai.
In the capital, Burberry said London Fashion Week in September is a more desirable time to open a new store.
Ms Cartwright said: "London will be interesting during the Olympics. There will be traffic chaos.
"We are focused on the luxury travelling consumer, not those who are visiting for the Olympics. In Beijing, we didn't see an uplift at our store during the Olympics, so opening in September is better for us."
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Sony hack: Angelina Jolie branded 'seriously out of her mind' in further embarrassing leaked email saga
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...