Burberry warns on profit as sales slowdow

Luxury British fashion label Burberry has today warned that its full year profits are likely “to be around the lower end of market expectations” after sales growth slowed during the second quarter. Against strong comparatives last year,

in the 10 weeks to September 8, retail sales grew just 6 percent. Of this, new space contributed 6 percent while like-for-like store sales were unchanged year-on-year, with a “deceleration in recent weeks”, which it is claiming is down to the economic uncertainty.

Ahead of the key retail trading period in the second half, Burberry said it now expected to adjust profit before tax for the 12 months to March 31, 2013 to be around the lower end of market expectations.

Burberry CEO, Angela Ahrendts, said: "As we stated in July, the external environment is becoming more challenging.

“In this context, second quarter retail sales growth has slowed against historically high comparatives. Given this background, we are tightly managing discretionary costs and taking appropriate actions to protect short term profitability, while continuing to execute on our proven five key strategies.”

In Q1, Burberry total revenue grew 11 percent to 408 million Pounds, since then its sales have slowed considerably, which shows that even the luxury market isn’t immune to the current financial climate.

Commenting on Burberry’s sales slowdown, Jaana Jatyri, CEO of fashion forecasting company, Trendstop.com said: "Burberry's latest results show that even the top-end of the market isn't functioning at full capacity in the current economic climate.

"The global economic crisis is dragging on and the longer it drags on the less confident even wealthier individuals become. Unfortunately, people lacking confidence do not shop at Burberry.

"By no means will Burberry implode, as it has an in-built hedge in its high net worth customer base and a CEO with an acute understanding of the market, but these figures show that even it is not immune to market conditions.

"A percentage of the aspirational buyers that have driven Burberry upwards are starting to run out of steam. In recent years, Burberry has thrived in the emerging markets, where people crave democratic luxury, but even the emerging markets are slowing.

"This is not the beginning of the end for Burberry, just a shot across the bows."