Burberry feels consumer chill
By Rachel Sanderson and Dan Lalor
Reuters
LONDON: Shares in Burberry , designer of this season's hit $3,000 Knight bag, took their biggest-ever daily fall on Tuesday after the fashion house said it may undershoot full-year forecasts.
The company, best known for its trench coats, said third-quarter total revenue to December 31 rose 26 percent to 235 million pounds but retail sales missed targets after it slashed prices more than usual during its December sale. Finance Director Stacey Cartwright said she was still "shooting for" 210 million pounds adjusted full-year earnings before interest and tax, but "it looks a bit of a stretch from where we are today". Cartwright said the retail sales were also hit by a faster-than-expected decline in its key Spanish business. A "couple of glitches" in its IT delivery system meant "we didn't get some product into stores on a timely basis", she added.
Shares in Burberry, Britain's largest luxury fashion brand, fell more than 16 percent to 405.5 pence, sending a chill through the luxury sector. It was Burberry's biggest daily fall since it was listed in London in 2002. UBS analyst Yashuhiro Yamaguchi said the U.S. market, accounting for around a third of Burberry's total revenue, still had good momentum, with 19 percent sales growth. "But we expect cyclical slow down to spread over time," he added. Merrill Lynch analyst Antoine Colonna cut his rating on the stock to "neutral".
SHARE DECLINE
Shares in European luxury good companies have declined in the past three months as expectations grow of a slowdown in high-end spending as global energy prices rise and U.S. and European housing markets weaken. Investors have cut the value of Burberry's shares by 26 percent in that period, deeper than the 11 percent fall for the DJ Stoxx personal and household goods index that includes European rivals LVMH , Christian Dior and Richemont .
Luxury goods executives have argued their sales will be sheltered from the downturn in consumer spending that is hitting many mid-market retailers, as those who can afford goods like their $3,000-plus handbags are relatively immune to economic hardship. Cartwright said Burberry's shift to premium pricing in the past year, including raising the price of its luxury handbags by 25 percent, would help it in the current environment. This spring, Burberry will sell a handbag called "Warrior" in golden alligator skin for 13,000 pounds.
"Our luxury positioning gives us an advantage in these unpredictable times. It doesn't insulate us completely, but it gives us an edge," Cartwright told reporters on Tuesday. Burberry said total revenue rose an underlying 23 percent to 254 million pounds in the three months to end-December. Within that, retail rose 14 percent to 161 million pounds, with same-store sales up 6 percent. Wholesale business was up 74 percent at 74 million pounds, with licensing fees up 7 percent to 19 million pounds.
(Editing by Will Waterman)
LONDON: Shares in Burberry , designer of this season's hit $3,000 Knight bag, took their biggest-ever daily fall on Tuesday after the fashion house said it may undershoot full-year forecasts.
The company, best known for its trench coats, said third-quarter total revenue to December 31 rose 26 percent to 235 million pounds but retail sales missed targets after it slashed prices more than usual during its December sale. Finance Director Stacey Cartwright said she was still "shooting for" 210 million pounds adjusted full-year earnings before interest and tax, but "it looks a bit of a stretch from where we are today". Cartwright said the retail sales were also hit by a faster-than-expected decline in its key Spanish business. A "couple of glitches" in its IT delivery system meant "we didn't get some product into stores on a timely basis", she added.
Shares in Burberry, Britain's largest luxury fashion brand, fell more than 16 percent to 405.5 pence, sending a chill through the luxury sector. It was Burberry's biggest daily fall since it was listed in London in 2002. UBS analyst Yashuhiro Yamaguchi said the U.S. market, accounting for around a third of Burberry's total revenue, still had good momentum, with 19 percent sales growth. "But we expect cyclical slow down to spread over time," he added. Merrill Lynch analyst Antoine Colonna cut his rating on the stock to "neutral".
SHARE DECLINE
Shares in European luxury good companies have declined in the past three months as expectations grow of a slowdown in high-end spending as global energy prices rise and U.S. and European housing markets weaken. Investors have cut the value of Burberry's shares by 26 percent in that period, deeper than the 11 percent fall for the DJ Stoxx personal and household goods index that includes European rivals LVMH , Christian Dior and Richemont .
Luxury goods executives have argued their sales will be sheltered from the downturn in consumer spending that is hitting many mid-market retailers, as those who can afford goods like their $3,000-plus handbags are relatively immune to economic hardship. Cartwright said Burberry's shift to premium pricing in the past year, including raising the price of its luxury handbags by 25 percent, would help it in the current environment. This spring, Burberry will sell a handbag called "Warrior" in golden alligator skin for 13,000 pounds.
"Our luxury positioning gives us an advantage in these unpredictable times. It doesn't insulate us completely, but it gives us an edge," Cartwright told reporters on Tuesday. Burberry said total revenue rose an underlying 23 percent to 254 million pounds in the three months to end-December. Within that, retail rose 14 percent to 161 million pounds, with same-store sales up 6 percent. Wholesale business was up 74 percent at 74 million pounds, with licensing fees up 7 percent to 19 million pounds.
(Editing by Will Waterman)
Labels: Burberry, Burberry handbags, Burberry online sale, Burberry sale handbags
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