London market dragged down by falling Burberry shares
The FTSE 100 ended the day down 0.6% or 45.62 points at 7,484.1 points.
Burberry shares dragged on the FTSE 100, tumbling 10% after it revealed plans to close stores and focus efforts on taking a slice of the higher-end luxury market.
London’s blue chip index ended the day down 0.6% or 45.62 points at 7,484.1, with the fashion house emerging as the biggest faller, dropping 198p to 1,787p.
Burberry said on Thursday that it will ditch its outlets within department stores and shut stores that are not found in or near communities of luxury shoppers.
Investors did not welcome the news.
David Madden, a market analyst at CMC Markets, said: “Burberry updated the market with its figures for the first six months of the year and its strategic plans, and neither went down well. Pre-tax profits jumped by 24%, but fell short of analysts’ expectations.
“The fashion house will shut down a number of stores and focus more on the higher end of the luxury goods market. The remodelling cost of the stores gave traders a reason to lock in profits.”
The announcement comes after Burberry recently confirmed that former boss and chief creative officer Christopher Bailey will step down from the board next year, ending his 17-year stint at the high-end fashion house.
In currency markets, the pound was mixed, rising 0.1% against the US dollar to 1.313 but falling 0.3% versus the euro to 1.127.
Across Europe, the French Cac 40 tumbled 1.16%, while the German Dax fell 1.49%.
Brent crude prices continued their ascent, rising 0.8% to $63.96, as political tensions in the Middle East raised questions about potential supply constraints.
“The corruption crackdown in Saudi Arabia, and the heightened tensions between the Saudis and the Iranians is making traders fearful for future supply levels,” Mr Madden said.
In UK stocks, Vodafone shares were one of the best performers on the FTSE 100, up 5.9p to 221.8p after revealing it was entering into partnership with network infrastructure firm CityFibre to bring fibre connectivity to as many as five million UK homes by 2025.
CityFibre surged 17.5p to 60.75p on the news.
Sainsbury’s fell 4.3p to 229.2p as the grocery giant reported a 9% fall in half-year profits and a sharp slowdown in sales growth amid fierce competition in the market.
Shares in Redrow tumbled 44p to 597.5p as the housebuilder said that “ongoing political and economic uncertainty” had caused sales to slip in recent weeks compared to a “very strong” market last year.
In a similarly grim report for the housing market, estate agency Countrywide said the environment was “challenging” and that the number of transactions made was likely to fall in contrast to 2016.
Countrywide shares fell 3.75p to 125p.
News from the two firms also weighed on the share price of rival housebuilders including Persimmon, down 110p to 2,662p, and Barratt Developments, down 23p to 612p.
The biggest risers on the FTSE 100 were Informa up 29p to 731.5p, Vodafone Group up 5.9p to 221.8p, Hammerson up 7p to 528.5p, and Coca-Cola HBC up 32p to 2,593p.
The biggest fallers on the FTSE 100 were Burberry, Persimmon, Barratt Developments and BHP Billiton down 47p to 1,429.5p.