Burberry Warns Full Year Profit to Be on Low End of Range

BurberryLondon–Burberry Group PLC, which has been riding a crest of luxurygoods sales, warned today that profits this year will be at the lower end of market expectations.

The company said retail sales in the 10 weeks to Sept. 8 were 6% higher than a year ago, but all of the growth was due to new stores openings. Comparing stores open for at least a year, retail sales were unchanged. More recently, there has been a “deceleration.”

The conservative outlook comes just as what some saw as a once-insatiable appetite for luxurygoods in emerging markets is downturning, particularly in China which has been the engine for much of the growth.

Burberry, renowned for its iconic trench coats and $22,384 handbags, said comparable store sales in the 10 weeks to Sept. 8 were flat compared with a year earlier, sending its shares down 17.8% in early trading.

Moreover, the company added that full-year adjusted pretax profit would be at the low end of analysts’ expectations of between 405 million and 445 million pounds.

“As we stated in July, the external environment is becoming more challenging,” said Angela Ahrendts, ceo. “In this context, second-quarter retail sales growth has slowed against historically high comparatives. Given this background, we are tightly managing discretionary costs and taking appropriate actions to protect short term profitability, while continuing to execute on our proven five key strategies.”

In the last few months, brands including LVMH and Hermès International SCA, as well as Burberry, have reported slowing sales growth and highlighted uncertain economic conditions.

“There isn’t much clarity in the Burberry’s statement,” said Rahul Sharma, managing director of retail analysts Neev Capital. “Burberry is saying there are problems with the entire luxury industry and not just the company.”

 

 

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Jeff Prine

Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com