Burberry Warns Again On Profit As Luxury Demand Ebbs

British luxury fashion brand Burberry warned on its full year profit outlook for the second time in three months on Friday, blaming a further slowing in global demand in the run up to Christmas, triggering another slump in its shares.

Shares in Burberry were down 7% in morning trading, extending losses over the last year to 44%. Other luxury stocks also traded lower, with LVMH and Kering (EPA:PRTP), which is overhauling its star label Gucci, both down 2%.

Burberry’s latest warning is a major blow to CEO Jonathan Akeroyd’s turnaround plan as he tries to move upmarket under the creative guidance of designer Daniel Lee, who launched his first collection last September.

Having experienced a deceleration in trading in its key December period, Burberry now expects full-year adjusted operating profit in a range between 410 million pounds ($523 million) and 460 million pounds.

In November, it had said adjusted operating profit would be towards the lower end of analysts’ forecasts at the time of 552 million pounds to 668 million pounds.

Rivals, led by French luxury leaders LVMH and Kering, have also reported lower demand for high-end goods in key markets.

Conflict in the Middle East has added geopolitical uncertainty to a luxury industry outlook already clouded by inflation, with shoppers in the U.S. and Europe tightening their purse strings while expectations for a strong post-pandemic rebound in China were derailed by a property crisis.

Burberry’s retail revenue in the 13 weeks to Dec. 30 fell 7% to 706 million pounds and comparable store sales slid 4%.

They were up 3% in the Asia Pacific region, which includes China, but down 5% in Europe and 15% lower in the Americas.

“The cracks appearing in luxury demand are very telling. So-called aspirational shoppers are one of the demographics pulling back, and Burberry is more exposed to this type of customer than super-high-end luxury,” Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown said.

Burberry said it now expected a currency headwind of 120 million pounds to revenue and about 60 million pounds to adjusted operating profit.

“We remain confident in our strategy to realise Burberry’s potential and we are committed to achieving our 4 billion pounds revenue ambition,” said Akeroyd. – Reuters

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