Pedestrians pass a Burberry Group Plc store, left, in the Causeway Bay shopping district of Hong Kong, China.
Xaume Olleros Bloomberg | Getty Images
LONDON – Burberry shares plunged 9% on Thursday after the British luxury fashion retailer warned that full-year operating profit would come in at the low end of forecasts amid a global slowdown in luxury spending.
The company also warned that it may miss its annual revenue projections for low double-digit growth.
In its fiscal second-quarter earnings report Thursday, Burberry reported comparable-store sales growth slowed to just 1%, down from 18% in the previous quarter, as momentum in China slowed.
The company recorded a half-year operating profit of £223 million ($276.64 million), down 15% on last year, but CEO Jonathan Akeroyd said Burberry was making “good progress” on its strategic goals.
“We continued to build momentum around our new creative vision with the launch of our Winter 23 collection in September, the first designed by Daniel Lee,” Akeroyd said in a statement.
“While the macroeconomic environment has become more challenging recently, we are confident in our strategy to realize our potential as the modern British luxury brand, and we remain committed to achieving our medium and long-term goals.”
Softer demand for luxury goods is weighing on companies around the world as economic uncertainty and higher inflation limit consumer spending on luxury items.
The world’s largest luxury group, LVMHalso reported a quarterly sales slowdown last month, while Cartier owner Richemont warned of weaker growth.
“The slowdown in luxury demand worldwide is impacting current business. If the weaker demand continues, we are unlikely to achieve our previously stated revenue guidance for FY24*,” Burberry said in its earnings report.
“In this context, adjusted operating profit would be at the lower end of the current consensus range (£552m-£668m)*.”
Along with the global issues facing the industry, Burberry has spoken out about the idiosyncratic challenge it currently faces in the UK due to the government cracking down on VAT-free shopping for international visitors.
Many British retailers, including Burberry, have called on Prime Minister Rishi Sunak and Chancellor of the Exchequer Jeremy Hunt to reconsider the decision on what critics call a “tourism tax”.
America was also a particular problem for Burberry this quarter, with comparable store sales down 10%.
“America is Burberry’s worst performer and sorting this out will be top of the agenda for CEO Jonathan Akeroyd,” said Russ Mould, investment director at stockbroker AJ Bell.
“In a way Burberry’s shareholders will be relieved to see other luxury peers struggling because it suggests the company is not facing problems of its own. All it can do now is protect and invest in its brand and wait for improvement in the background.”
Luxury )Business news from Burberry Group PLC