Published: Wed, July 13, 2016
Economy | By Melissa Porter

Burberry's sales down 3% in 'challenging' first quarter

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. Burberry says initiatives, announced in May, to deliver enhanced revenue growth (through focusing on key products, retail productivity and e-commerce) and improved efficiency (through changing its ways of working) are well under way.

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.

But Burberry's results are expected to see a boost following Britain's vote to leave the European Union since the company makes 90% of its sales outside the United Kingdom, in currencies such as the dollar and the yuan against which the pound has slumped.

Analysts estimate that adjusted profits will be boosted by around £90m if exchange rates remain at current levels, compared with previous forecasts of £50m. "The external environment remains challenging and underlying cost inflation pressures persist", it said.

In the wake of board changes announced on Monday, including chief executive Christopher Bailey's replacement in the top role by Céline boss Marco Gobbetti in order to focus exclusively on the role of chief creative officer, the company is now in a position to begin its £150m share buyback programme this financial year.

Burberry warned its wholesale unit, which makes up about a quarter of the business, will see sales dip by around 10pc in the six months to September. Finance boss Carol Fairweather will leave in 2017. His plan to target annual savings of £100m within three years implies job cuts.

Burberry said on Wednesday total retail revenue was £423 million ($562.5 million), up 4%, with Asia Pacific, excluding Hong Kong and Macau higher.

Sales in the United Kingdom showed mid-single digit percentage growth, the firm said.

The company on Wednesday reported a double-digit percentage decline in comparable sales in Hong Kong and said comparable sales in mainland China were roughly flat.

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