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Thursday 18 October 2018

Burberry to post sales rise as new chief executive settles in

Barclays predicts the firm will post a 3% rise in like-for-like sales in the third quarter, its sixth consecutive quarter of positive figures.

Burberry Catwalk – London Fashion Week 2017
Burberry Catwalk – London Fashion Week 2017

By Ravender Sembhy, Press Association City Editor

Fashion chain Burberry is expected to post rising sales this week in the retailer’s first update since new boss Marco Gobbetti’s announced an overhaul that will see it focus on luxury shoppers.

Barclays predicts the firm will post a 3% rise in like-for-like sales in the third quarter, its sixth consecutive period of positive figures.

Julian Easthope, analyst at the bank, said that Burberry could have been boosted by the Christmas gifting market.

Wednesday’s update comes after Mr Gobbetti unveiled a new vision for the firm in November in a bid to “sharpen” the brand’s positioning.

The new strategy involves a store closure programme, mainly affecting Burberry’s wholesale arm.

Burberry will also ditch its outlets within department stores, and shut stores that are not in or near communities of luxury shoppers.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “All being well the group will emerge both robustly profitable and with more control over its own destiny.

“However, we’re unlikely to get a meaningful update this early on.

“For these results, sentiment will be driven by sales numbers. We’re hopeful the group can deliver a sixth consecutive quarter of positive like-for-like growth.”

Mr Gobbetti’s shake-up came after Burberry confirmed that former boss and chief creative officer Christopher Bailey will step down from the board, ending his 17-year association with the high-end fashion house.

It clears the path for Mr Gobbetti to stamp his mark on Burberry, as he also embarks on an ambitious cost-cutting plan.

Graham Spooner, investment research analyst at The Share Centre, also expects the weak pound to play a part in the third quarter update.

While the Brexit battered currency has resulted in a sharp rise in business costs and destroyed consumer confidence for British shoppers, overseas consumers are now able to purchase goods at a knock down price.

“The half year results showed a reasonable pick up in sales as Chinese and Hong Kong based shoppers returned to its stores,” Mr Spooner said.

“Sales in the UK too were good, helped along by travelling tourists taking advantage of the weaker pound.

“We would expect these dynamics to have remained for the last quarter, but will there be pressure on Burberry from the squeeze on the incomes of the UK consumer? There could be an argument that wealthier Burberry shoppers won’t feel the pinch as much.”

The retailer’s trading update follows a mixed set of results for clothing retailers over Christmas.

Next, Ted Baker, FatFace and upmarket fashion brand Joules emerged as festive winners, while Marks & Spencer, Debenhams, House of Fraser, Moss Bros and Mothercare posted troubling figures.

Press Association

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