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Published: Thu, July 14, 2016
Economy | By Melissa Porter

Burberry's Q1 like-for-like sales fall by 3%


Outgoing chief executive Christopher Bailey, who will hand over the reins to Marco Gobbetti next year, put down the "challenging external environment" as reasons for the company's stagnant first quarter performance. Within this, comparable sales declined by 3%, while net new space contributed 3%.

Since May, its outlook for wholesale revenue, particularly in the USA, is more cautious for both the first and second halves of the year, in fashion and Beauty.

However, it is benefiting from a drop in the value of the pound after the United Kingdom voted to leave the European Union last month.

Like-for-like sales at Burberry have dropped 3% and retail revenues remained flat at £423m in what the British luxury goods brand has described as a "challenging" first quarter. Writing on Monday the analysts said that Burberry's May restructuring plan, created to drive revenue growth, boost productivity and achieve at least £100 million in additional cost cuts by the 2019 fiscal year, "could take more time to executive", given the management changes.

Burberry unveiled plans in May to revamp its retail operations in a bid to make annual savings of at least £100m by 2019. Burberry's operating expenses are close to 500 basis points higher than its peers according to UBS, with the company hiring about 15% more sales staff.

Burberry's fiscal Q1 report likely will reassure investors, considering that its declines aren't quite as dire as many feared, that Brexit's pound-pummeling could be a net benefit, and that it's moved to replace Christopher Bailey as CEO with Céline chief Marco Gobbetti, a move many analysts have been calling for.

The firm has also announced the finance boss Carol Fairweather will leave at the end of its financial year next year.

Shares rose 49p to 1252p. Burberry said Asia Pacific, Europe, the Middle East and Africa and the Americas all experienced low single-digit same-store sales declines.

However, that was an improvement on the previous quarter and better than analysts expected.

"We continue to focus on managing our business with agility while implementing the ambitious evolution of our strategies and ways of working we outlined in May, to position Burberry for long-term growth", Bailey added.

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