Burberry shares fell 11 per cent in morning trading as the company warned of deeper and quicker costs to keep profits on track, against falling demand in China and Hong Kong.
Overall, Burberry’s retail sales ticked up by two per cent, despite what the company is calling an “increasingly difficult” environment for luxury, to land at £774m for the six months to 30 September.
This was driven by strong sales in Europe, Middle East, India and Africa, where the iconic British brand saw double-digit sales growth. An uncertain economic environment in China, meanwhile, is weighing heavily on the company's Asian sales.
For the same time period, Burberry posted a total revenue of £1,105m, with wholesales revenue down three per cent to £305m and licensing revenue down 18 per cent to £26m.
The company's shares are down nine per cent since August.
Why it’s interesting
Burberry lowered its full-year guidance in May, saying it was dealing not just with currency headwinds but decreasing demand in what the company is calling an “increasingly challenging environment for luxury customers”.
As a British brand moving into Asian markets, Burberry’s performance is a bellwether for UK retail exporters. China and Hong Kong have more recently proven a tough market for luxury brands, however, and the past months' economic volatility in China have done little to help this, putting regional sales at a “mid single-digit percentage decline”.
The retailer said it will have to take "accelerated actions" to control costs and keep the impact of weak Asian sales down in its full year results.
What they said
Christopher Bailey, chief creative and chief executive officer, said:
The external environment became more challenging during the half, affecting luxury consumer demand in some of our key markets. In response, we have intensified our focus on driving sales and productivity, while taking swift action on discretionary costs.