Burberry sales rise 8% in first quarter despite Hong Kong deceleration
Burberry's retail sales grew 8% in the first quarter of the year, down from 14% growth in the last full year, as the fashion house suffered a decline from the Asia Pacific region and further deceleration into the double-digits in Hong Kong.
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The results were in line with consensus forecasts.
An increase of about £10m in retail/wholesale profit guidance since it was first given with final results in May is expected to be offset by a more adverse geographic mix, particularly from the challenging high-margin market of Hong Kong.
Like-for-like sales rose 6% in the period, led by double-digit growth in Europe, Middle East, India and Africa, but with Asia providing a single-digit percentage drag. In the year to end-March the comparable growth was 9%.
The continued challenging luxury environment in Hong Kong, which slowed further to a double-digit percentage decline in LFL sales. LFL sales in mainland China grew by a low single-digit percentage and Japan saw exceptional growth, albeit from a small base.
For the group as a whole, retail sales in the first quarter, which the company noted was historically the smallest for retail, increased by 8% underlying and 10% at reported currency rates to £407m on the previous year's £370m.
The FTSE 100 group also confirmed that the profit before tax for the full year will be even more weighted toward the second half than seen in the last full year, when 67% of profits were generated in the second half.
Shares in Burberry have been falling for more than four months on China growth concerns, which would be eased by fresh data released overnight, with second-quarter GDP Growth up 7%, ahead of estimates, and June retail sales up 10.6%, also beating forecast.
Strongest growth came from the "travelling luxury customer" in France, Italy and Spain. Sales in the Americas delivered high single-digit percentage comparable growth, with footfall recovering through the quarter after a soft start.
Growth was also driven by digital, with mobile particularly strong, and by continued demand for heritage trenchcoats and scarves which have been the outperforming product categories for a number of quarters.
Analysts at RBC Capital Markets said there were no material surprises in regional trends and was encouraged that "Americas registered a high single digit comparable store growth after a soft start to the period in April in terms of footfall, with other luxury brands and our channel checks also highlighting trading patterns".