A lower-than-expected fall in retail sales and news the weak pound is set to boost profits by £40 million more than previously expected sends shares in luxury fashion retailer Burberry (BRBY) 4.4% higher to £12.56.
Like-for-like retail sales in the first quarter to 30 June dipped 3% to £423 million, when compared to the same period a year ago.
This masked a mid-single digit rise in sales on the UK high street. The blame has been laid at the door of fewer tourists visiting Europe and a slowdown in China.
Online sales continued to grow in all its target regions, with almost 60% of traffic driven by mobile phones.
Digital sales will be core to its strategy going forward as will a focus on handbags.
The highlight for shareholders, however, is the potential currency gains this year.
A weaker pound resulting from June’s Brexit vote is set to swell pre-tax profits by £90 million in the year to 31 March 2017. This is up from the £50 million guidance set in April.
FX gains aside the core business has problems. First, the group is recovering from group pre-tax profit contracting by 29% in the year to 31 March 2016.
Now management has reaffirmed its cautious stance on wholesale revenue for the current financial year. With guidance for a 10% decline in the six months to 30 September.
This will give former Givenchy boss Marco Gobbetti plenty to think about when he replaces Christopher Bailey as chief executive next year.
Analysts at Swiss investment bank UBS believe the new appointment is positive for the business.
‘The market had been focused on Burberry making a senior appointment to drive the retail excellence programme.
‘We believe that the new CEO will spearhead this programme and we look forward to hearing how his previous experiences can be applied to Burberry’s aim to improve sales densities.’