Burberry Warns On China Weakness In First Half

The luxury goods maker opened a total of 13 new stores in the six-month period, including locations in Seoul, New York, Dubai and London, and closed nine shops.

But there was a mid single-digit percentage decline in Asia Pacific, with Hong Kong decelerating further in the second quarter.

Bailey says Burberry is working to boost sales and productivity, while cutting discretionary costs.

Chinese shoppers, which account for 30-40% of Burberry’s global revenue, have grown increasingly cautious this year after the country’s economy weakened, its currency devalued and its stock market tumbled.

Burberry said a “more challenging external environment” affected second quarter demand from luxury consumers, particularly Chinese customers.

The firm said accelerated actions to control costs were expected to minimise the impact on profit for its 2015-16 year and it expected to meet the average forecast of those analysts who have recently updated forecasts, which is 445 million pounds. “Looking further ahead, we maintain our focus on – and confidence in – the long-term growth opportunities for our business across channels, regions and product categories”, Bailey added.

Richard Hunter, head of equities at broker Hargreaves Lansdown, described the results as “underwhelming” and said the group was suffering in Asia and the USA, as “general economic malaise” hit demand.

Burberry saw growth slow across the U.S. in the second quarter, although there was better trading in Europe, with sales up more than 20 per cent in Italy, France and Spain. An uncertain economic environment in China, meanwhile, is weighing heavily on the company’s Asian sales.

It is the first time the Burberrry boss has really come under pressure since he took over the top job from Angela Ahrendts when she left to join Apple a year ago. Burberry made 456 million pounds in 2014-15.