Burberry going out of fashion as China market slows
Fashion firm Burberry has reported a fall in full-year profits and said it expects the “challenging environment for the luxury sector to continue”.
Pre-tax profits for the year to 31 March fell to £415.6m, down from £444.6m the previous year. Revenues fell 1% on an underlying basis to £2.5bn.
Burberry said it planned to revamp its retail operations and is aiming to make annual savings of at least £100m by 2019.
The group, famous for its trench coats and distinctive check pattern, has been hit by a slowdown in Chinese tourists visiting its stores in Europe, and weak demand in Hong Kong.
While like-for-like sales were down 1%, they were up 3% excluding Hong Kong and Macau.
The company said Hong Kong, which accounted for 9% of its global retail and wholesale revenue had suffered a “significantly lower footfall.”
Burberry chief executive Christopher Bailey said: “While we expect the challenging environment for the luxury sector to continue in the near term, we are firmly committed to making the changes needed to drive Burberry’s future outperformance, underpinned by strong brand and business fundamentals.”
John Botham of Invesco Perpetual said: “The growth in Chinese consumer spending has slowed and that is an issue for Burberry.
“Another issue is traditionally Hong Kong has been the place Chinese people have travelled to on holiday and increasingly they are travelling to Japan and that is a place where Burberry isn’t particularly strong.”