Growth slowing at Burberry

Kasmira Jefford
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SHARES IN BURBERRY fell more than seven per cent yesterday after the luxury fashion group blamed a tougher economic environment and a shift in US wholesale distribution for a slowdown in first quarter sales.

The 156-year-old British brand, best known for its signature check designs, said revenue rose 11 per cent to £408m in the three months to 30 June.

That was down from growth of 15 per cent in the fourth quarter and missed analyst forecasts of 14 per cent. Retail sales were up six per cent on a like-for-like basis, below expectations of eight per cent.

Chief executive Angela Ahrendts described the firm’s performance as “robust” but said the growth in revenue was delivered “against a more challenging external environment.”

Burberry was a stock market darling last year, lauded for its exposure to the fast-growing markets in Asia and, in particular, China.

But its shares have fallen 16 per cent over the last three months over fears that Europe’s debt crisis and slowing growth in some emerging markets like China, will catch up with the luxury firm.

Stacey Cartwright Burberry’s chief financial officer, yesterday insisted that China still presented huge opportunities for growth, despite retail revenue from the country dropping to the “mid-teens” from about 30 per cent last year.

“We still see enormous opportunity in China, where the bulk of our stores were inherited from our former franchisee and they have on average 2,000 square feet per store,” she said.

Cartwright said Burberry could have as many as 100 stores and planned to increase the average store space to 3,500-4,000 sq ft “at a minimum”.

Overall, sales growth at so-called mainline stores in the UK, France, Germany and the Greater China region was strong in the period, Burberry said.

Korea and Italy were among the weaker markets along with the US, where the group continues to phase out wholesale distribution to smaller department stores.

The group opened six mainline stores including its fourth store in Brazil and Russell Street in Hong Kong and is set to reopen two large flagships in London and Chicago later this year.

It plans to spend around £180-200m this year, with about one third of it going towards larger format stores such as its new Regent Street store opening in the autumn.