Burberry posts disappointing second-half sales

Burberry reported a 2 per cent decline in comparable sales, a closely watched figure that excludes store closings and new store openings, that missed analyst estimates. Results were hurt by a 5 per cent decline in its fourth quarter ended March 31 amid a poor performance in Hong Kong, the US, Europe and Britain.

Shares fell as much as 7 per cent before retracing some of the loss to close nearly 70 pence lower at 1275 pence in London.

“Sales look to have been under pressure in all areas,” said Liberum retail analyst Tom Gadsby.

Burberry isn’t alone in struggling against headwinds in global luxury. LVMH Moet Hennessy Louis Vuitton earlier this week reported first-quarter sales rose 4 per cent, below what analysts were expecting, as the company grappled with sluggishness in France following the Paris terror attacks.

Mr Bailey took Burberry’s helm in May 2014, shortly before currency gyrations and political unrest hammered sales in greater China, a typically high-margin region for the company.

Mainland China is now bouncing back, but sales have stayed weak in Hong Kong — where Burberry has 14 full-scale stores and a number of concessions — in the wake of tighter visa policies for residents in nearby Shenzhen, previously frequent visitors to Hong Kong.

Mr Bailey has moved to renegotiate rents and reduce store space in Hong Kong, along with tweaking marketing and product assortments to better appeal to local shoppers. Sales in Hong Kong nevertheless fell more than 20 per cent in the fourth quarter.

Beyond Asia, Thursday’s results showed broad-based weakness, indicating that Mr Bailey is struggling on a number of fronts.

The US, the world’s largest luxury market, has been particularly difficult for Burberry. The company’s long-term push to burnish its brand there hasn’t yet gained enough traction.

“We are focused on elevating our brand in the US longer-term,” said chief financial officer Carol Fairweather, describing choppy demand from US shoppers as “perplexing”.

As with LVMH, the terror attacks in Europe took their toll on Burberry. Comparable sales in Europe weakened in the fourth quarter as tourism declined in recent months. “Clearly, events in Paris and Brussels do have an impact on sentiment,” Ms. Fairweather said.