In the third quarter, Burberry delivered underlying retail sales growth of 1 percent and comparable sales were unchanged year-on-year, an improvement from negative 4 percent in the second quarter, but below internal assumptions. The company said, in what remains a challenging external environment, and ahead of Lunar New Year, it currently expects adjusted profit before tax for FY 2016 to be broadly in line with market forecasts.

Commenting on the third quarter trading, Christopher Bailey, Chief Creative and Chief Executive Officer, commented, "In a tougher environment than expected, our sustained focus on growth and cost control drove a number of positive results over the quarter, including the outperformance of digital and a return to growth in mainland China. While Burberry was impacted by the ongoing challenges facing the luxury sector, headwinds in Hong Kong and Macau masked an otherwise stronger performance in many markets.”

Sales performance by region

Asia Pacific saw a mid-single-digit percentage decline in comparable sales. However, excluding Hong Kong and Macau, comparable sales grew by a mid-single-digit percentage. Growth resumed in both mainland China and Korea. Japan remained strong with around 50 percent comparable sales growth. Burberry opened one concession in Japan in the quarter, bringing the total to six free-standing stores, 20 concessions and 10 small children’s wear concessions.

Comparable sales in Hong Kong declined again by over 20 percent, driven by a further significant decline in footfall. EMEIA achieved mid-single-digit comparable sales growth. Driven by the travelling luxury customer, Italy and Spain continued to deliver growth in excess of 20 percent, while France slowed. The UK, which accounts for over one-third of EMEIA's retail revenue, became more challenging, with a slowdown from travelling customers, primarily Chinese and Middle Eastern consumers.

The Americas delivered marginally positive comparable sales growth. Consistent with the first half of the year, Canada, Brazil and Mexico, which account for over 15 percent of Americas' retail revenue, together delivered double-digit percentage comparable sales growth. The United States experienced some recovery from domestic customers in the third quarter, but a further deterioration from all tourist groups.

In mainline, accessories again outperformed apparel, with strength in small leather goods and scarves reflecting the positive response to the company’s festive assortment. The company said, emerging categories of ponchos and dresses continued to outperform, while outerwear was affected by unseasonably warm weather. During the third quarter, the company opened two mainline stores and closed one, while opening and closing three concessions.

FY16 outlook

In FY 2016, net new space is still expected to contribute low single-digit percentage growth to total retail revenue. Burberry continues to expect total wholesale revenue at constant exchange rates in the six months to March 31, 2016 to be broadly unchanged on the same period last year.

In apparel and accessories, an underlying mid- single-digit percentage decline reflects cautious ordering by wholesale customers globally, as well as the re-phasing of orders in the Americas into the first half from the second half of this year. Double-digit percentage underlying growth is expected in Beauty in the second half, driven by sales to distributors of our new male fragrance, Mr Burberry, offset by some destocking.

If exchange rates remain at current levels, the company’s latest expectation is that the benefit to FY 2016 reported retail/wholesale profit would be about 10 million pounds (14.4 million dollars) higher than at FY 2015 rates.

Total licensing revenue for FY 2016 is still planned to be down by about 40 percent at constant exchange rates, due to the expiry of the Japanese Burberry licences. Burberry continues to expect double-digit percentage growth from the global product licences and about 25 million pounds (36 million dollars) from Japan. As part of its focus on core luxury categories, the company’s watch licence will not be renewed in December 2017.