Monday 23 April 2018

Americas sales decline leaves Burberry trailing

The luxury retailer's shares fell the most in six months
The luxury retailer's shares fell the most in six months

Robert Williams

UK luxury retailer Burberry Group's quarterly sales missed analyst estimates as an accelerating decline in the Americas region and falling revenue in Hong Kong showed the scale of the task facing incoming CEO Marco Gobbetti.

Fourth-quarter retail revenue rose 2pc on a comparable basis, the London-based company said yesterday, less than a predicted rise of 5pc in a Bloomberg survey. The shares fell the most in six months.

Burberry's sluggish sales gain shows that not all luxury companies are feeling the full benefit of a rebound in demand that has buoyed industry leader LVMH.

While brands such as Kering's Gucci have taken steps to overhaul design and reinvigorate their brand identity, Burberry has embarked on a cost-cutting campaign and cut back on the number of products on offer.

"People have failed to spot a weak underlying business with product that fails to capture the imagination and is a bit stale in terms of the design," said Tom Gadsby, an analyst at Liberum Capital. A 1pc decline in second-half underlying sales "tells the whole story".

The weak quarter adds to the challenge facing Gobbetti, the former head of LVMH's Celine label who is due to succeed Christopher Bailey as CEO in July.

Under Bailey, who will remain the company's creative director, Burberry has seen sales growth stagnate amid declines in Asia and worsening results at its wholesale unit.

"You win with product innovation in this market, and they trail," said Luca Solca, an analyst at Exane BNP Paribas. "We have no insight on the new CEO's intentions, but if the plan is more of the same, we would expect things to get worse before they get better."

A deteriorating performance in the Americas, the source of more than a quarter of group revenue, was a worry.

The company is avoiding US stores that have steep markdowns to protect its luxury image, while the dollar's strength is encouraging wealthy Americans to take their spending abroad.

Like most luxury peers, Burberry saw a rebound in the Asia Pacific region - but not sluggish Hong Kong - in the second half of last year, with mainland China showing high single-digit growth. (Bloomberg)

Indo Business

Business Newsletter

Read the leading stories from the world of Business.

Also in Business