Burberry shares slump as it warns of lower profits

By GARETH MACKIE
Published on 11/09/2012 21:27

SHARES in Burberry plunged more than 20 per cent yesterday after the luxury goods group warned that its profits will be at the low end of City expectations following a sales slowdown.

The firm has previously shrugged off the economic downturn with stellar sales, but a trading update yesterday revealed that its sales growth has ground to a halt in recent weeks.

A 6 per cent increase in sales for the period was attributed solely to new selling space. Stripping out the effect of expansion, like-for-like sales were unchanged in the ten weeks to 8 September. That represents a sharp slowdown from the 6 per cent increase reported for the three months to 30 June.

Forecasts for the firm’s annual pre-tax profits range from £407 million to £445m. Burberry’s shares tumbled 20.9 per cent to 1,088p after it said its results were likely to come in at the bottom end of expectations.

Burberry is due to post its first-half results next month and chief executive Angela Ahrendts warned conditions were “becoming more challenging”.

She added: “Given this background, we are tightly managing discretionary costs and taking appropriate actions to protect short term profitability.”

Charles Stanley analyst Sam Hart said demand was being held back by the current uncertain economic environment, although Burberry was well placed to benefit on the back of rising disposable incomes in emerging markets.

Hart added: “The luxury goods sector is probably particularly vulnerable to any slowdown in demand from China, given that it has been a key driver of growth in recent years.”