Burberry hit by weak department stores despite sterling boost

Burberry hit by weak department stores despite sterling boost

LONDON: British luxury fashion brand Burberry reported a drop in first-half sales on Tuesday , hitting its shares as weak demand from US department stores offset a surge in sales in its home market as tourists took advantage of a lower pound.The stock, one of the best performers since Britain voted to leave the European Union on Jun 23 in anticipation the company would benefit from a slide in the pound, dropped as much as 9 per cent, its biggest one day fall for four years.Burberry, which makes more than 80 per cent of its sales abroad, said a 30 per cent jump in UK sales helped it generate a 2 per cent rise in comparable retail sales in the second quarter, its first growth in that measure for four quarters.But total sales fell 4 per cent on an underlying basis to £1.16 billion in the six months ended September, as its stores performance was dampened by a fall in wholesale and licensing revenues.”Foreign exchange benefits aside, Burberry struggles to drive meaningful growth,” broker Liberum said, adding it expected no improvement in the second half as U.S. department store demand remained depressed. It has a “sell” rating on Burberry stock.The shares hit a 14-month high on Friday, partly in anticipation of a currency-related lift to sales and profit. Burberry said if sterling remained at the level of Oct 12, adjusted annual profit would be boosted by some £125 million.Citi analysts said the tailwind from the weaker pound, albeit it broadly in line with its expectations, provided “welcome breathing room in a difficult year”. They are “neutral” on the stock.LONDON SHOPPERSChief Financial Officer Carol Fairweather said there had been strong demand from both consumers and tourists in Britain since the Brexit vote for products including a bridle bag that was available to buy immediately after it appeared on the runway in September.”The Chinese are very much part of that, but all tourists are up in this quarter, the US as well,” she said. ” clearly influenced by foreign exchange rates movements but they are also really responding to everything they are seeing in the stores.”Britain, where the trench-coat maker incurs about 40 per cent of its costs, accounted for about 15 per cent of sales in the half year, she said, up from about 10 per cent previously.But markets further a…

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