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Burberry reports 3 percent decline in Q1 comparable sales

By Prachi Singh

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Business |REPORT

In the first quarter, retail comparable sales at Burberry declined by 3 percent, with a similar performance in all three regions. The company said that the external environment remains challenging and underlying cost inflation pressures persist. At 423million pounds (563 million dollars), retail sales were unchanged on an underlying basis and were up 4 percent at reported FX.

Commenting on the first quarter trading, Christopher Bailey, Chief Creative and CEO said, “In what remained a challenging external environment, underlying retail sales were flat in the first quarter. 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.”

All three regions report decline in comparable sales

All three regions experienced a low single-digit percentage comparable sales decline. Within Asia Pacific, Hong Kong showed some improvement compared to the fourth quarter, but continued to see a double-digit percentage decline in comparable sales. Mainland China comparable sales were broadly unchanged year-on-year, impacted by the evolution of the store portfolio in Beijing, the company’s largest market in the country. Japan saw weaker tourism, offset in part by growth from domestic customers.

In EMEIA, the UK, which is Burberry’s largest market in the region, improved in the final weeks of the quarter, to deliver mid-single-digit percentage comparable growth. Continental Europe remained depressed, with double-digit declines in sales to travelling luxury customers, in particular in France and Italy, offset in part by growth from domestic consumers in all major markets.

The Americas continued to experience uneven demand from domestic customers, while spend by the travelling luxury customer remained down by a double-digit percentage.

Witnesses growth through digital mediums

Digital continued to outperform and grew strongly in all regions. Mobile delivered the majority of the growth, with approaching 60 percent of traffic to the site now via a mobile device. The single pool of inventory model has been further expanded, with about 90 stores now live globally, improving stock availability for all online markets.

By product, in mainline, fashion outperformed replenishment as customers responded positively to innovation and newness. Relative strength in bags was driven by the runway rucksack, while lightweight outerwear performed well, in particular cashmere trench coats and newly-launched menswear styles.

Retail expansion expected to boost sales

In FY 2017, net new space is still expected to contribute low single-digit percentage growth to total retail revenue. Around 15 mainline store openings are planned, with a similar number of closures. The company expects total wholesale revenue at constant exchange rates in the six months to September 30, 2016 to be down by over 10 percent on the same period last year.

In FY 2017, if exchange rates remain at current levels, Burberry expects FY 2017 reported adjusted retail/wholesale profit to benefit by about 90 million pounds (119 million dollars) compared to FY 2016 rates. Total licensing revenue for FY 2017 is planned to be down by about 20 million pounds (26.5 million dollars) at constant exchange rates, primarily reflecting the expiry of the Japanese Burberry licences. Adjusted profit before tax is expected to be more second-half weighted than in FY 2016.

picture:burberryplc

Burberry