Burberry share price sinks as group warns of challenging demand

Shares in Burberry (LON:BRBY) have fallen deep into the red in today’s session after the company warned of challenging demand environment next year. The luxury goods retailer further revealed that a drop in tourist spending and weaker demand in Hong Kong had pressured sales in recent months.

As of 10:23 BST, Burberry’s share price had lost 5.43 percent to 1,272.00p, significantly underperforming the benchmark FTSE 100 index which has slipped marginally lower and currently stands 0.22 percent in the red at 6,349.19 points. The blue-chip retailer’s shares have lost just under 30 percent of their value over the past year, but are up nearly five percent in the year-to-date.
Burberry announced in a statement this morning that its total underlying revenue had slipped one percent to £1.41 billion in the six months ended March 31, while its retail revenue came in flat at £1.06 billion. The group’s results were dragged down by Hong Kong, where Burberry’s sales slumped 20 percent. The company also noted that sales to travelling luxury goods customers, particularly from China, had fallen in Continental Europe.

“In an external environment that remains challenging for luxury, we continue to focus on reducing discretionary costs and are making good progress with developing enhanced future productivity and efficiency plans,” Burberry’s chief executive Christopher Bailey commented in the statement.
Going forward, the FTSE 100 luxury goods retailer warned that its full-year adjusted profit before tax would come in around the bottom of the range of analysts’ expectations, reflecting challenging demand environment.
Berenberg analyst Zuzanna Pusz told Bloomberg today that Burberry’s outlook was “likely to be taken negatively for the whole luxury sector”. The group’s results follow Marks & Spencer’s (LON:MKS) quarterly update earlier this month when the retailer delivered yet another fall in clothing sales. Blue-chip peer Next (LON:NXT) meanwhile warned that it might be facing its worst year since the financial crisis amid prospects that consumers will spend less on clothing.
As of 10:42 BST, Thursday, 14 April, Burberry Group plc share price is 1,250.50p.