Luxury goods leader Burberry (BRBY) edges 1.83% (26p) higher to £14.45 as news of a strong first quarter sales performance pleases. Yet the quintessentially British brand, famed for its high-end trench coats and leather bags, also cautions full-year profits could be hit by increasing exchange rate headwinds.
For the three months to 30 June, London-headquartered Burberry, known for its iconic equestrian knight logo and Burberry check trademarks, flags 17% growth in overall retail sales to £370 million, up 12% on a like-for-like basis with the balance delivered by new store space.
Investors respond positively to news double-digit growth was generated across Asia Pacific, notably China and Hong Kong, as well as the Americas, although softer markets meant the £6.3 billion cap delivered only low single-digit sales progress in the Europe, Middle East, India and Africa (EMEIA). An additional positive is that double-digit sales growth was also generated across mens' and womens' products as well as accessories
CEO and Chief Creative Christopher Bailey, who took over in the hot seat from Angela Ahrendts in May, attributes the strong performance to ongoing investment in the business. Sustained investment to build the brand is being carried out across Burberry's retail stores as well as in digital, as demonstrated by strong online performances across all regions. Burberry continues to have success with its strategies to engage with customers through digital and fashion events and is benefiting from more targeted marketing, as well as the proliferation of orders taken on iPads in-store and generated over mobile devices and collected in-store.
Yet the impact of today's positive sales progress update is slightly tempered by a warning the appreciation of sterling is having a dampening effect on sales numbers. Indeed, should exchange rates stay at current levels, then Burberry reckons full-year retail and wholesale profit could be cut by £55 million. Movements in the sterling-yen exchange rate could reduce licensing revenue by around £10 million too.
