Burberry hit by weak de­part­ment stores

Kuwait Times - - BUSINESS -

LONDON: Bri­tish lux­ury fash­ion brand Burberry re­ported a drop in first-half sales yes­ter­day, hit­ting its shares as weak de­mand from US de­part­ment stores off­set a surge in sales in its home mar­ket as tourists took ad­van­tage of a lower pound. The stock, one of the best per­form­ers since Bri­tain voted to leave the Euro­pean Union on June 23 in an­tic­i­pa­tion the com­pany would ben­e­fit from a slide in the pound, dropped as much as 9 per­cent, its big­gest one day fall for four years.

Burberry, which makes more than 80 per­cent of its sales abroad, said a 30 per­cent jump in UK sales helped it gen­er­ate a 2 per­cent rise in com­pa­ra­ble re­tail sales in the sec­ond quar­ter, its first growth in that mea­sure for four quar­ters. But to­tal sales fell 4 per­cent on an un­der­ly­ing ba­sis to 1.16 bil­lion pounds ($1.44 bil­lion) in the six months ended Septem­ber, as its stores per­for­mance was damp­ened by a fall in whole­sale and li­cens­ing rev­enues.

“For­eign ex­change ben­e­fits aside, Burberry strug­gles to drive mean­ing­ful growth,” bro­ker Liberum said, adding it ex­pected no im­prove­ment in the sec­ond half as US de­part­ment store de­mand re­mained de­pressed. It has a “sell” rat­ing on Burberry stock. The shares hit a 14-month high on Fri­day, partly in an­tic­i­pa­tion of a cur­rency-related lift to sales and profit.

Burberry said if ster­ling re­mained at the level of Oct. 12, ad­justed an­nual profit would be boosted by some 125 mil­lion pounds. Citi an­a­lysts said the tail­wind from the weaker pound, al­beit it broadly in line with its ex­pec­ta­tions, pro­vided “wel­come breath­ing room in a dif­fi­cult year”. They are “neu­tral” on the stock.


Chief Fi­nan­cial Of­fi­cer Carol Fair­weather said there had been strong de­mand from both con­sumers and tourists in Bri­tain since the Brexit vote for prod­ucts in­clud­ing a bri­dle bag that was avail­able to buy im­me­di­ately after it ap­peared on the run­way in Septem­ber. “The Chi­nese are very much part of that, but all tourists are up in this quar­ter, the US as well,” she said.

“(They are) clearly in­flu­enced by for­eign ex­change rates move­ments but they are also re­ally re­spond­ing to ev­ery­thing they are see­ing in the stores.” Bri­tain, where the trench-coat maker in­curs about 40 per­cent of its costs, ac­counted for about 15 per­cent of sales in the half year, she said, up from about 10 per­cent pre­vi­ously.But mar­kets fur­ther afield continued to strug­gle, par­tic­u­larly Hong Kong, which saw dou­ble-digit falls, and the United States, where de­part­ment stores were hav­ing a “dif­fi­cult time,” Fair­weather said.

Burberry said whole­sale rev­enue fell by a mid­teens per­cent­age in the half year, and it ex­pected lit­tle or no im­prove­ment in the rest of the year. The com­pany, which added ac­tress Lily James to its list of mod­els in the sum­mer, has been work­ing to im­prove its stores, where sales mar­gins have lagged lux­ury in­dus­try ri­vals. — Reuters

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