British luxury goods giant Burberry (BRBY) swaggers in with a 3% rise in underlying first quarter sales. The trading update reveals boss Marco Gobbetti sounding bullish about the future under new chief creative officer Riccardo Tisci, who launches his first collection in September.

However, shares in the global luxury goods retailer with ‘a distinctly British attitude’ shed 3.9% to trade at £20.19. The news that softer tourist demand squeezed sales in the UK and Continental Europe provides some investors with an excuse for modest profit-taking.

That's not an unreasonable reaction considering that the shares are up 35% since the start of a rally that began in early February.

Burberry - JULY 18MARCO’S BULLISH REMARKS

‘We are pleased with our progress in the quarter,’ insists CEO Gobbetti, reporting solid 3% retail revenue growth to £479m for the 13 weeks to 30 June and reiterating full year 2019 guidance at constant exchange rates.

Horseferry Road-headquartered Burberry also assures it is on track to deliver £100m of cost savings, has seen currency headwinds ease and begun its £150m share buyback.

‘The team has embraced Riccardo’s creative vision and is working well together as we prepare for his debut collection in September, the next step in our journey,’ adds Gobbetti. ‘While we know it will take time to achieve our ambitions, our progress to-date and the energy in and around the company give me confidence for the future.'

Gobbetti is clearly excited about the Burberry brands potential in the hands of former Givenchy star Tisci, the successor to Christopher Bailey, who helped turn the trench coats-to-handbags seller into an internationally-beloved brand.

Burberry Art of the Trench Seoul 2016 Event_005

Encouragingly, Gobbetti flags strong growth in digital revenues, mid-single digit growth in Asia Pacific, with mainland China in growth and Hong Kong, Korea and Japan all boosted by spending by well-heeled Chinese tourists.

Moreover, he says Americas revenue grew ‘by a high single digit percentage’, the improved trends seen in last year’s fourth quarter continuing and US footfall positive, albeit the turbulent Middle East region remained weak. Newly launched handbags, such as the Belt and D-ring, also performed well, auguring well for the transformation of Burberry’s leather business.

GOING MORE UPMARKET

Gobbetti is repositioning Burberry, pushing the exclusivity of the brand ever higher in a bid to catch-up faster-growing luxury rivals, although he has previously warned there will be little growth in revenue and operating profit while the plan is implemented.

It does appear to be working; in May, Burberry’s shares bounced higher as the cashmere scarves-to-rainwear designer beat forecasts with a 2% rise in annual adjusted operating profit to £467m.


Issue Date: 11 Jul 2018