Burberry update comes with profit warning as American woes continue

Burberry delivered a fairly short (well, short for Burberry) trading update on Friday with a few too many minus signs in it and not enough plus signs. Oh, and there was a profit warning too.

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The company said the 13 weeks to 30 December saw retail revenue of £706 million, down from £756 million a year earlier. While that 7% drop looked big, the company said the fall at constant exchange rates (CER) was just 2%. Within that figure, comparable store sales were down 4% but new space added 2% to the numbers.

So what was the problem during the quarter? Clearly it was the Americas where comparable store sales dropped a significant 15%. But EMEIA was down too, albeit by a smaller 5%. Only Asia Pacific was positive with a 3% rise. That divided into an 8% Mainland China increase, a 9% rise in Japan, a 2% South Asia Pacific uplift, but a 10% fall in South Korea.

CEO Jonathan Akeroyd stayed upbeat but withdrew the firm’s profit guidance. He said: “We are continuing to deliver the transition to our new modern British luxury creative expression for Burberry which started appearing in our stores in early Autumn. 

“We are still in the early stages of executing on this, which has become more challenging against the backdrop of slowing luxury demand. We experienced a further deceleration in our key December trading period and we now expect our full-year results to be below our previous guidance. We remain confident in our strategy to realise Burberry’s potential and we are committed to achieving our £4 billion revenue ambition.”

So how bad was that profits downgrade? It now expects adjusted operating profit for the financial year to 30 March to be in the range of £410 million to £460 million. And exchange rates will continue to be an issue with a currency headwind of around £120 million hitting revenue and around £60 million denting adjusted operating profit.

Back in November the company had said annual adjusted operating profit could be at the “lower end” of the consensus range of £552 million to £668 million and the new forecast undershoots that by some margin.