Business

Burberry shares dive despite sales rise

Burberry models Image copyright Dan Medhurst, Burberry

Shares in luxury fashion brand Burberry have fallen by 6% despite an "exceptional" performance in the UK.

The company has previously said the weak pound had attracted overseas shoppers to its British stores.

Burberry, best known for its trench coats and distinctive checks, said like-for-like retail sales rose by 3% in the second half of the year.

However, growth slowed in the final three months and sales fell in the "highly promotional" US market.

American shoppers have been taking advantage of the strong dollar to buy abroad, but that has hit demand in the US itself.

Like-for-like retail sales, which strip out stores open for less than a year, rose by 3% in the third quarter, but by only 2% in the final quarter up to 31 March.

Total retail sales rose by 3% to £1.3bn.

However, overall total revenues, which include its wholesale and licensing revenues, fell by 1% to £1.6bn after the impact of favourable currency moves was stripped out.

Earlier this month, Burberry announced it was going to stop developing its fragrance and beauty products in-house and instead franchise the business to US cosmetics group Coty.

That decision was a key reason for the fall in wholesale revenues, as the group has been running down its stocks of beauty products.

"In an uncertain environment, we continue to take action to strengthen the brand and reposition Burberry for growth," said chief executive Christopher Bailey.

"The outperformance of fashion and the strong customer response to new products underline our renewed creative momentum."

Brexit

George Salmon, equity analyst at Hargreaves Lansdown, said: "UK sales continue to surge ahead, as credit-card wielding tourists with expensive tastes flock to these shores to take advantage of sterling's weakness and pick up a currency-induced bargain.

"However, as ever with currency, there are two sides to the coin. The dollar's strength is holding back sales in the US," he added.

Burberry has plans to open a new £50m manufacturing and weaving plant in Leeds and relocate staff from its existing Castleford and Keighley sites.

In the wake of last year's Brexit vote, chairman John Peace told investors at the company's annual meeting that the opening of the new facility might be delayed, as the company considered the implications of the referendum.

Burberry said on Wednesday it had no update to that position.

However, the company said its "commitment to manufacturing in Yorkshire" was unchanged, but that it was "taking a moment to think through" the plans.

Burberry's chief finance officer Julie Brown said: "Clearly, with the election announced yesterday, there is a period of instability as we go through Brexit, and that's a concern for any global business... We're interested in understanding what the tariffs will be on exports from the UK."

But she added, "we still have a strong UK economy".

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