Burberry warns over profits as sales dip into the red
- Credit: PA
Luxury fashion group Burberry has warned tough trading will hit profits for the year ahead after seeing recent sales slump back into the red.
The group - famous for its trench coats and check scarves - revealed fourth quarter sales tumbled by 5% amid lower spending by Chinese tourists in continental Europe and a collapse in the Hong Kong luxury market.
Burberry shares dropped by 7% on the FTSE 100 Index as it cautioned that profits for the new financial year ending 2017 would be at the bottom end of forecasts, even with a £60 million currency boost taken into account.
The fashion label has been battling a slowdown in luxury spending, sparked by China’s economic woes.
It makes around a third of its sales from the Asia Pacific region and has been hit hard as Chinese tourists have reined in their spending, particularly in Hong Kong - traditionally a prime shopping destination for Chinese consumers.
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The group said retail sales fell 2% overall in the final six months of its year, but were 1% higher with Hong Kong and Macau stripped out.
It is expecting profits for the year to the end of March to meet City expectations, but investors were left reeling by its latest warning for 2016/17 results.
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Embattled chief executive Christopher Bailey, who is also chief creative officer, said the group would continue to slash costs to help offset the difficult trading.
“In an external environment that remains challenging for luxury, we continue to focus on reducing discretionary costs and are making good progress with developing enhanced future productivity and efficiency plans,” he said.
He is hoping the efficiency drive and turnaround efforts may limit profit pressure over the year ahead and will provide an update on plans at annual results next month.