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Sales up at Burberry but strong pound causes concern

British luxury brand Burberry has reported a 12% rise in like-for-like retail sales in the first quarter, but warned that foreign exchange rates could have an impact on profits.

Retail revenue in the three months to June 30 was £370m, up 17% or 9% adjusted for currency rates.

Sales were particularly strong in China and Hong Kong, offset by a “softening” of the markets in Europe, Middle East, India and Africa.

Burberry said its performance was in line with expectations but warned that if current unfavourable exchange rates continue, it could reduce wholesale and retail profits this year by about £55m, with an adjusted operating margin of 16%, down from 17.5%.

A further £10m could be lost due to global licensing revenues, which are also affected by exchange rates.

Chief financial officer Carol Fairweather said the profit impact could worsen in 2016 and beyond “if current exchange rates persist”.

She could not say which currencies were at particular fault. “As a business in the UK, it’s all of the currencies. In that respect, we are no different to any global business headquartered in the UK.”

China and Hong Kong drove double-digit comparable sales growth in the Asia Pacific region, while the Americas also performed strongly.

During the first quarter, Burberry opened four stores – one in Edinburgh and three airport stores in London Heathrow, Madrid and Milan – and closed three.

Christopher Bailey, chief creative and chief executive officer, said: “This first-quarter performance reflects our focus on striving to give customers the best possible experience of the Burberry brand through ongoing investment in retail, digital and service, both on and offline. 

“The 12% increase in comparable sales demonstrates our teams’ success in unlocking the benefits of these investments, as we continue to concentrate on the things we can control in an uncertain external environment.”

Burberry will report its half-year results on October 14.

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