Luxury retailer Burberry has reported unchanged revenue for the three months to 30 June, amid a "challenging" trading environment – and analysts say the British designer is still too reliant on the Chinese market.
Shares in the company were up 4.8 per cent in early trading.
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The group posted a three per cent decline in like-for-like sales in the first quarter of the 2017 financial year, with sales in Asia Pacific up excluding Hong Kong and Macau. Sales in the UK showed mid-single digit percentage growth, the firm said.
“In what remained a challenging external environment, underlying retail sales were flat in the first quarter," said Christopher Bailey, Burberry's chief creative and chief executive.
"In this context, we continue to focus on managing our business with agility whilst implementing the ambitious evolution of our strategies and ways of working we outlined in May, to position Burberry for long-term growth.
"These plans are now well underway and on track to deliver our financial goals. This progress, together with our recent management appointments, gives us real confidence for the future.”
The group said Hong Kong showed "some improvement compared to the fourth quarter", but still delivered a double-digit percentage decline in like-for-like sales, while mainland China comparable sales were broadly flat year-on-year.
In the UK, sales improved in the final weeks of the quarter, but continental Europe remained "depressed", with double-digit declines in sales to travelling luxury customers, in particular in France and Italy. The company said the Americas continued to experience uneven demand from domestic customers, while spend by the travelling luxury customer remained down by a double-digit percentage.
Burberry had been anticipated to announce better than expected numbers, given the recent weakness in sterling and the designer's exposure to foreign markets. Michael Hewson, chief market analyst at CMC Markets UK, said the company "could well see its profits get a bounce on the back of the weakness of the pound". The three per cent decline in sales was ahead of consensus estimates of a five per cent drop.
However, analysts at Liberum said the "underlying concerns" around Burberry had resurfaced despite the currency benefits of Brexit . "In our view Burberry is overly reliant on Chinese demand (40 per cent of sales vs 30 per cent for the industry) and that remains muted," they said.
The British fashion house plans to open around 15 stores – but will close "a similar number". Meanwhile, profits for 2017 are expected to be more second-half weighted than in 2016.
Bailey will soon be replaced as chief executive by Marco Gobbetti, who will join from French brand Celine. The new boss was announced earlier this week – the move will see Bailey retain his title of creative chief but move into the role of president.
Liberum said in a note this morning that "forecasts are likely to come under threat when the new management team takes over in the new year", adding: "We would not be surprised to see expectations lowered following a strategic renew."