Burberry Issues Profit Warning as Luxury Slowdown Hits Sales
Burberry issued a profit warning on Friday as the worldwide slowdown in luxury demand continues to dent sales.
In an earlier-than-expected trading update, Burberry said it anticipates adjusted operating profit for the financial year ending March 30 to be around 410 million pounds to 460 million pounds, below previous guidance.
Burberry had originally planned to update on fiscal third quarter sales on Jan. 19.
The company added that, based on foreign exchange rates effective as of Dec. 29, it is also expecting a currency headwind of around 120 million to the full-year revenue figure, and approximately 60 million to adjusted operating profit.
The company’s shares were down 7 percent at 12.65 pounds following the announcement.
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Jonathan Akeroyd, chief executive officer, said: “We are continuing to deliver the transition to our new modern British luxury creative expression for Burberry, which started appearing in our stores in early autumn. We are still in the early stages of executing on this, which has become more challenging against the backdrop of slowing luxury demand.
“We experienced a further deceleration in our key December trading period and we now expect our full year results to be below our previous guidance. We remain confident in our strategy to realize Burberry’s potential.”
He added that Burberry is committed to achieving its 4 billion pounds revenue ambition in the medium term.
In the 13 weeks to Dec. 30, Burberry said that retail revenue was down 7 percent at reported rates and down 2 percent at constant exchange to 706 million pounds.
Comparable store sales in the three-month period were down 4 percent. In Asia-Pacific they gained 3 percent, due chiefly to gains in Mainland China. They were down 5 percent in the EMEIA region, while in the Americas they fell 15 percent.
The company had already alerted the markets in November that sales and profits would be at the lower end of its previously stated range.
Burberry had been expecting low-double-digit growth for the full fiscal year, and adjusted operating profit between 552 million pounds to 668 million pounds. Adjusted operating profit could land at the “lower end” of the consensus range, the company said at the time.
“This is a challenging macro environment coming from all regions, and it’s quite unique,” said Burberry’s chief executive officer Jonathan Akeroyd. “Historically, you’d get a softness in one region, and you’d be able to compensate for it somewhere else.”
