Fashion darling Burberry plunges as it unveils shock profits warning
Laura Chesters is a business reporter and covers the consumer, food, drink and luxury goods sectors on the business desk at The London Evening Standard, i, The Independent and The Independent on Sunday
Wednesday 12 September 2012
It's the hottest ticket at London Fashion Week, and a brand that has recovered from its "chavvy" connotations to become a global powerhouse in the world of luxury style. So the stock market – and the fashion world – was understandably shocked when Burberry issued a profit warning yesterday, sending its shares plunging 21 per cent.
In a surprise update, the group revealed it had been hit by a slowdown in spending across the world.
The darling of the fashion scene had once enjoyed sales growth in double digits, but yesterday it reported that like-for-like sales ground to a halt in the 10 weeks to 8 September, and its full year profits would be at the bottom end of expectations at about £407m.
Retail sales, including from new stores, were up 6 per cent. The slowdown compares with a strong first quarter, when retail sales grew by 14 per cent.
The chief financial officer Stacey Cartwright said: "In the last two weeks there has been a global slowdown. We have seen this across the board in Asia, the US, Europe and the UK."
Luca Solca, a luxury brands expert at CA Chevreux, blamed Burberry's reliance on very high-end clothing rather than accessories such as handbags. He said: "Apparel – on which Burberry is more dependent than other mega-brands – is softer. In difficult times consumers prefer leather goods and hard luxury accessories as they are more visible and work better as status symbols."
Ms Cartwright said: "The level of growth has slowed but for most people 6 per cent growth would be very good."
Despite its issues, the brand is gearing up for London Fashion Week, where it will present its Burberry Prorsum womenswear spring/summer show on Monday.
Burberry's shares crashed 287p to 1,088p.
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