Burberry sales rocket from UK tourism boom
TOURISTS taking advantage of the cheap pound gave Burberry a sales boost by snapping up its ponchos, bags and dresses.
But despite the lift, disappointing demand from American department stores and concerns about trading in Hong Kong and China sent its shares down 7.2pc, or 109p, to 1403p.
Chief executive Christopher Bailey described the past six months as ‘challenging’ while finance director Carol Fairweather said a £20m costcutting plan was under way.
she also said the firm would receive a £125m boost from currency benefits – an improvement from the £90m forecast in July.
The tumbling pound meant a raft of tourists flocked to its UK stores, fuelling a 30pc jump in sales which contributed to a 2pc rise in store revenues over the second quarter – the first growth seen in a year.
Fairweather said: ‘Tourists have been changing their travel plans to come to the UK. As the currency moved, people realised they can benefit from that. We have also seen growth from local customers due to improved products and services. There has been a big response to our new range of bags.’
Burberry launched a new bridal bag – a rounded satchel with equestrian features – at its latest catwalk show. The alligator skin version costs almost £5,000. A £1,395 black nylon and leather rucksack with sequinned flowers has also been popular.
About 40pc of costs originate in the UK. sales from UK customers accounted for about 15pc of sales in the half year, up from about 10pc. Total revenue for the six months to september 30 was down 4pc to £1.1bn.
Hong Kong saw double-digit falls, and America also had a difficult time. Burberry, along with other luxury goods firms, has been hit hard by the economic uncertainty sweeping the world, as well as currency swings. This has had a negative impact on confidence among wealthy American shoppers.
Wholesale revenue, which is primarily sales to department stores, was down 14pc to £287m, which was more than analysts had forecast. sales of its beauty lines fell to £76m from £82m.
Fairweather said more needed to be done to establish Burberry as a luxury brand in America. she warned that pushing more stock into us department stores when demand was weak could have forced retailers to have discounted items, denting the image. she said: ‘it would have been the wrong thing to do.’
The company, which is now using actress Lily James as a model, has been working on improving its stores around the world and investing in new products. A new chief executive, Marco Gobbetti, will join the group next summer, when Bailey will step into the president role while retaining his position as chief creative officer.
Nivindya sharma, senior analyst at Verdict retail, said: ‘Marco Gobbetti is due to take the reins imminently, and will bring a fresh structure and direction to the brand, while freeing up Christopher Bailey to do what he does best – innovate and create – keeping Burberry in prime position to weather the storms ahead.’