Burberry sales miss estimates as demand shrinks
By Robert Williams - Apr 19th 2017, 16:22
Paris - UK luxury retailer Burberry’s quarterly sales missed analyst estimates as an accelerating decline in the Americas region countered gains in mainland China.
Fourth-quarter retail revenue rose 2% on a comparable basis, the London-based company said on Wednesday, less than a predicted increase of 5% in a Bloomberg survey. The shares fell the most in six months.
A deteriorating performance in the Americas, the source of more than a quarter of group revenue, was a key cause for concern. Sales in the region showed a mid-single-digit percentage decline in the second half, Burberry said, having been down by a low single-digit percentage in the third quarter.
The company is avoiding US stores that have steep markdowns to protect its luxury image, while the dollar’s strength is encouraging wealthy Americans to take their spending abroad.
“People have failed to spot a weak underlying business with product that fails to capture the imagination and is a bit stale in terms of the design,” said Tom Gadsby, an analyst at Liberum Capital. A 1% decline in second-half underlying sales “tells the whole story.”
Burberry shares fell as much as 7.1% to 1 580 pence in early London trading, the steepest intraday decline since October 18.
The sales illustrate the scale of the challenge facing Marco Gobbetti, the former head of LVMH’s Celine label who is due to succeed Christopher Bailey as chief executive officer in July. Under Bailey, who will remain the company’s creative director, Burberry has seen sales growth stagnate amid declines in Asia and worsening results at its wholesale unit.
“In an uncertain environment, we continue to take action to strengthen the brand and reposition Burberry for growth,” Bailey said in the statement.
Like most luxury peers, Burberry saw a rebound in the Asia-Pacific region in the second half of last year, with mainland China showing high single-digit percentage growth. Sales declined in Hong Kong due to a drop in the number of shoppers, the company said, while South Korean revenue also fell due to a weak economy and reduced promotional activity.
The company said it’s maintaining its forecast for adjusted pretax profit. It’s due to report full-year earnings on May 18.