Shares in Burberry fell more than 5.4 per cent this morning after the iconic British brand lowered its guidance for the full year, saying wholesale and retail profit for 2016 would come in around £40m below expectations.
Underlying revenues at luxury brand Burberry rose 11 per cent to £2.5bn in the full year to March, up from £2.3bn last year.
However, foreign currency movements dampened reported revenue growth, though it was still a healthy eight per cent increase.
Adjusted pre-tax profit rose seven per cent to £456m.
But once a £38m adverse exchange rate impact was taken into account this fell one per cent to £445m on an underlying basis.
Underlying retail sales rose by 14 per cent to £1.8bn, up from £1.6bn a year earlier, or by 11 per cent on a reported basis.
Wholesale sales rose six per cent to £648m on an underlying basis and three per cent on a reported basis. Burberry experienced declines of three per cent in the second half because of "cautious ordering from customers selling to the European consumer and in Asian travel retail markets".
Additionally licensing sales fell 14 per cent to £67.7m on a reported basis, down from £79.2m a year earlier.
Why it's interesting
Burberry is one of the world's coolest brands, with the recent opening of its new Beverley Hills flagship pulling in the likes of Cara Delevigne, Suki Waterhouse, Mila Kunis, Anna Wintour and Elton John - as well as fellow Brit James Cordon gracing the catwalk.
But the impact of Angela Ahrendts' departure for Apple last year is still being determined. Christopher Bailey took on the role as chief executive last year alongside his existing job as chief creative officer, but some critics warned that his design background would not stand him in good stead for the broader role. So far he has continued to impress on the catwalk, but the real test - specifically, how the company copes with falling demand and currency headwinds - could only just be arriving.
What Burberry said
Against a challenging external backdrop, our global team has focused ever more intensely on our core, including celebrating the British-made products that are our brand signature and extending our online and offline integration.
At this early stage of the year, we are seeing increased uncertainty in some markets.
Against this background, we will continue to manage our business dynamically - capitalising on the significant opportunities we have by channel, region and product to create long-term shareholder value.
Investors were unconvinced when Bailey took on the wider reins, and he still has some way to go in proving them wrong. Analysts and shareholders alike will be watching to see how he manages the next few months if the challenges continue to trouble Burberry's bottom line.