Burberry Shares Dropped on Slow Q1 Growth

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British luxury fashion icon Burberry Group plc (LSE:BRBY) drew first blood amongst the luxury brands as the company’s first quarter trading performance hinted slower growth in the high fashion sector.

In the first quarter report released today, Burberry’s 11% rise total revenues missed analysts’ expectations of a 15% increase from last quarter’s performance, achieving only £408 million compared to the anticipated £418 million.

The market was punitive in its response as Burberry’s share price lost as much as £1.04 at 1:30 PM GMT, or over 8% its value the previous day to £11.80.

Anticipated Slowdown

“We expect Burberry’s shares to suffer today,” said Bethany Hocking from Investec, acknowledging, nonetheless, that the first quarter is the smallest portion of the group’s sales.

Investors may have been disappointed that the flagship store on Regent Street will not open in time for the Olympic Games, even as six mainline stores opened elsewhere.

Burberry’s Chief Executive Angela Ahrendts herself admitted the company is up against a “more challenging external environment”.

Last May 2012, the 156-year old maker of trench coats admitted it was expecting a lower operating margin in the retail and wholesale segment during the first half of the year.

The news ignited woes that the luxury sector, which showed resiliency during the financial crisis, is now feeling the effects of the ever growing uncertainties in the Eurozone as well as in the reported slower growth in China, where Burberry gets 12% of its retail and wholesale revenue.

The group’s Chief Financial Officer Stacey Cartwright said Burberry can’t predict if market conditions will get tougher, Bloomberg reported.


Nonetheless, Chief Executive Ahrendts said the UK’s largest luxury goods company delivered a “robust first quarter”.

The group gained £41 million more in revenue compared to the £367 million it posted the previous quarter, led by its retail business that now accounts for 70% of its revenue source.

Average selling prices increased, higher penetration of the high end Burberry Prorsum, and men’s tailoring and non-apparel performed strongly, Burberry noted.

The supplier of the first people to reach the South Pole said no significant change to the financial position of the company was seen other than what has been reported today.

“Building on our balanced business model and strong operational foundation, we continue to invest in our retail, digital and marketing strategies to drive long-term sustainable growth, while remaining responsive to the changing external environment,” CEO Ahrendts closed in a statement.

Company Spotlight

Burberry Group plc is a global luxury brand retailer of menswear, womenswear, accessories, and bespoke fashion items.

The company became public in 2002 and forms part of the FTSE 100 Index.

Shares were down £1.06 to £11.78 a share at 3:00 PM GMT, with over 4.5 million shares swapping hands.

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