Pressure on Burberry over sales

Published on 07/10/2012 00:00

LUXURY goods group ­Burberry will seek to reassure investors of its long-term growth prospects this week after a shock warning over a slowdown in Chinese sales.

The fashion firm – whose luxury bags and coats have proved a hit in emerging markets including China over recent years – saw more than £1 billion wiped off its market value last month after it warned over profits and said sales had started to fall since early September.

A trading update on Thursday will be pored over for news on second quarter sales, which suggested Burberry’s rampant growth was coming to an end as China’s powerhouse economy slows.

Shares have slumped by more than a quarter since last month’s sales shock.

The firm said like-for-like sales ground to a halt in the ten weeks to 8 September and had started to fall over more recent weeks – a marked reversal on the 6 per cent hike seen in the first quarter.

Burberry warned full-year profits would be at the bottom end of expectations – previously for between £407 million and £455m.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said sales may be helped as comparatives ease during the second half.

He added: “Management may move to outline tentative initiatives aimed at easing recent difficulties. Previous moves to protect the brand long term and raise product prices could be diluted, with lower price products staying on the shelves for longer.”