Burberry weakened by wholesale concern
Shares in fashion house Burberry fell 7% today as it faced up to a soft UK market and warned of further revenues pressure at its wholesale arm.
The company, which yesterday named Angela Ahrendts as its new chief executive on a package worth up to $27.3m (€22.7m) over three years, said business in the UK had been affected by the July bombings in London.
In a first half trading update, Burberry posted a 3% rise in global sales to $621m (€517m) for the six months to the end of September, compared with a 14% increase a year ago.
The company said it had been helped by sales in new and refurbished stores as it reported strong growth of 5% in North America and Asia, compared with a 1% fall in sales in Europe.
This reflected the “soft” market in the UK, where it sells through stores such as Harrods, Harvey Nichols and Selfridges, as well as at its own boutiques.
Chief financial officer Stacey Cartwright said: “In the UK we are seeing some of the toughest trading conditions for 20 years, as reported by other retailers.
“Our business is particularly London-centric and London in particular has been impacted since the July 7 attacks.”
Sales at the company’s boutiques worldwide were up 9% in the first half, from $194m (€161m) to $217m (€180m). Burberry said it was on track to increase average selling space 9% over the course of the financial year, excluding the acquisition of 12 outlets in Taiwan.
But sales in Burberry’s wholesale arm, which account for 5% of total revenues, fell 1% in the first half from $344m (€287m) to $334m (€278m).
The company said it expected further decline in the second half on the basis of orders for its spring/summer 2006 collections so far.
Seymour Pierce research analyst Rhys Williams said the luxury goods market remained “difficult” and lowered his profits forecast from $287m (€239m) to $283m (€236m). Pre-tax profits in 2005 were $292m (€243m).
Ms Ahrendts, currently executive vice president of US clothing company Liz Claiborne, will take over from Burberry chief executive Rose Marie Bravo when she moves to the new role of vice chairman next July.
Ms Bravo, 54, has been widely credited with transforming Burberry from a struggling UK retailer into a global fashion brand in her eight years in charge.
Her departure from the top job next July will follow the demerger of Burberry from its major shareholder GUS.
Retail conglomerate GUS, which also owns Argos, is due to sell its 66% in Burberry – worth more than $1.75bn (€1.45bn) – in December.
