Business

Burberry's sales down 3% in 'challenging' first quarter

Burberry store Image copyright Reuters

Burberry has reported a 3% fall in like-for-like sales and flat retail revenues of £423m after what it called a "challenging" first quarter.

On Monday, Burberry announced chief executive Christopher Bailey would be replaced after two years in the post.

The results indicate the task ahead for his replacement Marco Gobbetti, who will join the company next year.

The firm is struggling to counter a downturn in mainland China and Hong Kong and fewer tourists in Europe.

It said its outlook for wholesale revenues, particularly in the US, for both the first and second halves of the year remained "cautious" in both fashion and beauty.

However, it is benefiting from a drop in the value of the pound after the UK voted to leave the European Union last month.

Burberry said its adjusted profit would be boosted by about £90m if exchange rates remain at current levels.

Its new stores helped boost sales by 3% and online sales grew "strongly in all regions".

Image copyright Reuters
Image caption Many shareholders were unhappy with Christopher Bailey's performance as chief executive

Andrew Hall, analyst at Verdict Retail, said: "[Mr] Gobbetti's appointment is seen as a direct response to growing frustration with [Mr] Bailey's inability to turn Burberry's poor performance around.

"Whilst sales declined across all three regions, a dire performance in Hong Kong and Macau stood out as a particularly stubborn thorn in the side of the luxury player.

"One of [Mr] Gobbetti's priorities must be examining operations in these Far Eastern markets and considering new avenues for growth."

Mr Gobbetti has run LVMH-owned luxury label Celine since 2008 and was chief executive of Givenchy for the previous four years.

After Mr Gobbetti's appointment, Mr Bailey will become president and remain chief creative officer - the role he held before also taking on the position of chief executive.

Many shareholders had been unhappy with Mr Bailey's performance as both chief executive and chief creative officer and had called for change at the top.

In May, the company reported a £29m fall in annual pre-tax profits for the year to 31 March to £415.6m and said it expected the "challenging environment for the luxury sector" would continue.

Burberry shares have lost more than a third of their value over the past 12 months after sales in Asia - particularly Hong Kong - fell as Chinese consumers reined in spending. About a third of Burberry sales come from Asia.

Burberry said in May that it would reduce its product range and focus more on handbags in response to slowing sales.

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