Burberry has announced a 3% fall in underlying sales as problems in Hong Kong and mainland Europe offset growth in the UK.
Christopher Bailey, the luxury British brand’s chief creative officer and chief executive, who is due to step aside from the latter role next year, said Burberry continued to face a “challenging external environment”, but insisted that he had “real confidence for the future”.
The company announced retail sales of £423m in the three months to 30 June, the same level as the previous year at constant exchange rates. Sales dipped by 3% once new store openings were excluded.
Bailey warned that Burberry’s outlook for wholesale sales in fashion and beauty, particularly in the US, where department stores have been cutting back on orders, was more cautious. Global wholesale sales are expected to be down by 10% in the six months to the end of September, the first half of Burberry’s financial year.
However, Bailey said initiatives to improve retail productivity, cut costs and focus on bestselling products meant that he was confident of delivering full-year profits in line with expectations. Burberry has begun consultations on job cuts announced in May, but he would not give details on the number of staff involved.
Shares in the company shot up by more than 5% in morning trading on hopes that the company’s overseas earnings would be boosted by the relatively higher value of the dollar and the euro versus the pound, following the Brexit vote. Burberry said profits would benefit by £90m from changes to exchange rates, compared with a £50m benefit predicted in May.
The promise that a £150m share buyback would commence also lifted the share price.
Burberry said sales in Hong Kong continued to fall by double-digit percentages, as a result of travel restrictions that were imposed on Chinese nationals after democracy demonstrations last year. However, excluding Hong Kong, sales across Asia rose.
The brand enjoyed a rise of about 5% in sales at established stores in the UK, which account for more than one-third of European sales, as newly introduced products such as a designer rucksack, ponchos and cashmere trenchcoats sold well.
Sales in mainland Europe suffered, particularly in France and Italy, as a result of double-digit declines in sales to luxury-loving tourists. European trade was affected by cautiousness in the aftermath of the Paris attacks and the Chinese economic slowdown, which has held back overseas tourism and spending.
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