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Burberry sales growth hit by decline in Hong Kong

Burberry’s retail sales growth slowed to an underlying 8% in the three months to June 30 as a strong performance in Europe failed to fully offset its increasingly sluggish sales in Hong Kong.

Retail sales were £407m, up 10% when adjusted for currency exchange rates and 6% on a like-for-like basis. During the same period last year, underlying retail sales grew 17% or 12% on a like-for-like basis.

The luxury business enjoyed double-digit comparable sales growth in the EMEIA region (Europe, Middle East, India and Africa), driven by France, Italy and Spain in particular. The Americas also performed well, with footfall recovering through the quarter after a soft start. 

However, Asia Pacific experienced a low single-digit decline due to the “continued challenging environment” in Hong Kong, which decelerated further to a double-digit percentage decline in like-for-like sales. Mainland China’s like-for-likes grew by a low single-digit percentage.

Five Burberry stores opened during the period, including a new unit in Brookfield Place, New York, and relocations in the Mall of the Emirates, Dubai, and in Westfield London. It also expanded its Regent Street flagship in London to include a café and exclusive gifting area. Three stores closed.

Digital continued to outperform, driven by mobile.

Christopher Bailey, chief creative and chief executive officer, said: “We are pleased with our performance in this first quarter, with retail sales up 8% underlying and 6% comparable sales growth. 

“This reflects our ongoing emphasis on serving our customers ever more effectively on and offline, and continued innovation in design and marketing – particularly around the iconic, British-made products that performed so well in the period [trench coats and cashmere scarves].

“While mindful that the external environment remains challenging, we will continue to focus on growth opportunities across channels, regions and products, with exciting plans for the year ahead.”

If exchange rates remain at current levels, Burberry expects its reported retail and wholesale profit to be £20m higher than last year. This is an increase of about £10m since the guidance issued in May 2015.

However, it expects this increase to be offset by “a more adverse geographic mix, particularly from the high margin market of Hong Kong”.

@KirstyMcGregor

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