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Burberry's shares take a hit as it warns of challenges in luxury

Lauretta Roberts
14 April 2016

Burberry's shares dropped 5% today to £12.78 as it revealed its interim results and warned that full-year profits would be at the lower end of analysts' expectations due largely to its "continued expectation that the demand environment remains challenging and that underlying cost inflation pressures persist".

Sales for the six months to 31 March 2016 were down 1% (underlying) at £1,410m, while retail revenue remained unchanged at £1,064m. Wholesale was down 1% at £330m and licensing was down from £3m to £16m due to the planned expiration of its Japanese licensing deals.

Chief executive Christopher Bailey said: “In an external environment that remains challenging for luxury, we continue to focus on reducing discretionary costs and are making good progress with developing enhanced future productivity and efficiency plans. Meanwhile, brand momentum is strong, digital continued to outperform in the half and innovation in new products is resonating well with our customers.”

In its statement the business said that fewer travelling luxury customers, in particular the Chinese, had hit sales in EMEA and the Americas. In Asia, Hong Kong experienced a steep decline in footfall but positive growth was achieved in mainland China and Korea.

Burberry Banner

The "Banner" bag sold well

Digital sales grew in all regions and Burberry cited "Banner" bags, the new season runway rucksack, ponchos and scarves as top sellers in accessories. Dresses performed well in the apparel category but unseasonal weather hit outerwear, though lightweight cashmere trench coats did well.

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