Burberry drops as slowdown knocks sector

BLUE chip fashion retailer Burberry issued a profit warning yesterday, as analysts warned the whole luxury sector may be hit by the global economic slowdown.

Shares in the FTSE 100 company plunged 20.87 per cent in trading yesterday to close at 1,088p.

The group, which has been hit previously by falling sales in China, said like-for-like sales were unchanged year on year, with sales dropping off in recent weeks.

Burberry, whose trademark is the distinctive red, camel and black check pattern, added that adjusted pre-tax profit for the 12 months to 31 March next year would be “around the lower end of market expectations”, which is expected to be around £407m.

In July, Burberry reported a slowdown in first-quarter sales in China, a market that has been one of the main drivers of a boom in luxury brands, with consumers eager to buy designer labels, including Burberry’s raincoats.

Chief executive Angela Ahrendts said yesterday that Burberry would be “tightly managing discretionary costs” and take actions to protect short-term profits.

Mike van Dulken, head of research at Accendo Markets, said yesterday: “It stems from an issue within the luxury sector, rather than the company itself,” suggesting that the weak outlook for China was spooking the luxury sector in general.

Kate Calvert, analyst at Seymour Pierce, suggested that Burberry was the first in line of the luxury firms to report falling sales, and other players may report similar slowdowns in due course.

Analysts at Morgan Stanley called Burberry’s results a “negative read-across for the sector”.

LVMH, a French luxury conglomerate, fell by 3.36 per cent yesterday, Swiss luxury group Richemont fell 5.14 per cent and British leather goods firm Mulberry closed 4.22 per cent down.