Burberry’s profits on decline

Worldwide
Published:  27 October, 2015

London based Burberry announced its full-year profits might be on decline for the second consecutive year.

Burberry has indicated that full-year profit will probably decline for the second straight year as a drop in Asian sales led first-half revenue to miss analysts’ estimates.

According to the company, adjusted pretax profit will be “broadly in line” with an average of analyst estimates of US$689 million in the year through March. Earnings on that basis reached US$699 pounds last year. Second-quarter retail sales were up 1% on a comparable basis, the slowest pace in three years. The group’s shares fell 12%.

Demand in the U.S. was uneven and Asia Pacific sales had a mid-single digit decline, with Hong Kong decelerating further in the second quarter.

Luxury goods brands are globally struggling on multiple fronts; following a devaluation of the yuan and a cooling of extravagant sales in China, along with a decrease in demand in Hong Kong and Macau as wealthy Chinese shop in Japan and Europe instead.

This has weakened Burberry’s position more than some of its competitors as China represents over 30% of its revenue, compared to only 2% for Japan, where many of those shoppers are purchasing. Furthermore, the U.K. accounts for about 40% of the total European retail sales, at a time when consumers are taking advantage of a weaker euro, according to analysts.

Kering, however, has reported a growth in revenue for the third-quarter and remains optimistic for the rest of 2015. Read more here.

Source: Bloomberg Business