Burberry shares tumble despite boost from sterling slide

Added 18th October 2016

At their lowest point during trading Tuesday morning, Burberry shares were down 8.9% at 1376p even though its interim revenues benefited from the post-Brexit drop in the pound.

Burberry shares tumble despite boost from sterling slide

In spite of Burberry’s underperforming stock, the FTSE 100 rose by 1.09% to 7023, uplifted by positive gains in share price for British low-cost airline EasyJet and precious metals miner Polymetal International. 

The iconic British fashion house reported underlying revenue for the period was down compared with the previous year by 4% at £1.16bn.

However, after factoring in foreign exchange rate movements, sales were up 5%. Over the second quarter, Burberry reported comparable sales in the UK had grown by over 30% as tourists took advantage of weaker sterling to buy bags, clothing and other products bearing its signature tartan.

Based on 30 September exchange rates, the luxury label said it expects to see an increase in retail/wholesale profits of £105m for the full year 2017.

Assuming sterling continues to fall further, the benefits could be even more pronounced, Burberry added. Even factoring in the 12 October rates would result in an additional £20m in 2017 profits by its calculation.

The “challenging external environment” of regional retail markets still took its toll on the firm, however. Gains in retail revenue were modest (up 2% at £859m) and largely offset by a 14% drop in underlying wholesale revenue (£287m).

Burberry’s retail/wholesale division in the Americas experienced “continued uneven demand” and only generated £280m in sales, 12% lower than the previous year’s figure. The firm’s sales also continued to lag in major markets across Continental Europe.

Licensing revenue only generated £13m, in line with the expiring brand licensing deals in Japan.

Burberry’s chief executive Christopher Bailey reiterated the group was on track to deliver its financial goals, including a £20m cost saving initiative by 2017, and would continue enhancing its digital presence.  

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