Burberry reports 12% rise in sales but profits likely to be hit by strength of the pound

10th July 2014

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Fashion house Burberry has reported a robust rise in trading for the three months to the end of June but has cautioned that the strength of sterling would hit full year profits.

The FTSE 100 listed firm group enjoyed revenues of £370m over the period, representing a 10% hike year-on-year, while sales rose by 12% as the firm enjoyed double-digit comparable sales growth in America, as well as the Asia Pacific region, especially in China.

In early trading shares in the business known for its distinctive check designs rose 3%, or by 37p, to 1,457p as brokers welcomed the update.

Burberry: Sales boost

Burberry: Sales boost

However the group warned that if exchange rates remain at current levels, the full impact on annual retail and wholesale profits “will be material” and it could be slashed by as much as £55m.

Chief executive officer Christopher Bailey commented: “This first quarter performance reflects our focus on striving to give customers the best possible experience of the Burberry brand through ongoing investment in retail, digital and service, both on and offline.

“The 12% increase in comparable sales demonstrates our team’s success in unlocking the benefits of these investments, as we continue to concentrate on the things we can control in an uncertain external environment. With great brand momentum and a focused vision, we remain confident of delivering sustainable, profitable growth into the future.”

Helal Miah, investment research analyst at stockbroker The Share Centre, is still recommending the stock as ‘buy’. He said: “After a difficult period of transition, investors will be pleased to see Burberry’s first quarter underlying retail revenue at £370m, up 12% compared to the same period last year.

“We expect the various strategies in place to help drive growth, along with the general improvement in the economic backdrop. However, as anticipated, the appreciation of sterling is having a dampening effect on the sales numbers and investors should be aware we expect this to be an issue going forward, especially for a company whose majority sales are not denominated in sterling.”

 

 

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