Luxury fashion house Burberry in sales warning
Tuesday 11 September 2012
The rampant growth at Burberry showed signs of wavering today as the luxury fashion house warned its profits would be at the bottom end of expectations.
The group, which has 196 retail stores, 207 concessions, 48 outlet shops and 58 franchise stores worldwide, said like-for-like sales ground to a halt in the 10 weeks to September 8 and have started to fall over recent weeks. Total sales including new space were up 6%.
The luxury goods firm, famous for its red, black and camel check, warned adjusted pre-tax profits for the year to March 31 will be around the lower end of market expectations.
Burberry, which was founded in 1856, spent much of the year bucking the gloomy trend in the wider retail sector due to its exposure to robust emerging markets, especially China.
Burberry chief executive Angela Ahrendts warned the external environment was "becoming more challenging".
She added: "Given this background, we are tightly managing discretionary costs and taking appropriate actions to protect short term profitability."
The flat like-for-like sales in the second quarter so far are a sharp slowdown from the 6% hike reported for the first quarter to June 30.
Burberry reported a 24% surge in annual profits to £366 million in its last financial year, while total revenues were also up 24% to £1.9 billion as key Asian markets showed more strong growth and flagship stores in London and Paris performed well.
Burberry previously announced plans to add a further 12% to 14% of selling space in this financial year but did not give details of store openings in today's update.
The group has been focusing on larger format stores, such as its relocated site in London's Regent Street.
It is due to issue another trading update on October 11 before its interim results for the six months to September 30 on November 7.
Burberry shares slumped 17% in the wake of the warning, wiping £1 billion from its market value and leaving the stock at its lowest point this year.
The previous range of market forecasts for the financial year had been for Burberry to achieve profits of between £407 million and £455 million.
Investec Securities analyst Bathany Hocking said: "We have been fans of Burberry, and remain of the view that the strategy, luxury positioning and management team should lead to long-term sector outperformance.
"Today's statement does, however, imply a significant slowdown and Burberry is not immune from wider macro-economic turbulence."
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