Shares in luxury retailer Burberry have lost a fifth of their value on news of a slowdown in second-quarter sales. The purveyor of posh raincoats and swanky handbags has told the market that like-for-like retail sales in the 10 weeks to 8 September were flat, with overall sales rising 6 per cent, in line with store openings. This represents a significant slowdown on first-quarter sales growth of 14 per cent; and 6 per cent on a like-for-like basis.
The company is now looking to rein in costs and reckons profits for the year will be at the lower end of expectations, which ranged from £407m to £455m. While it may be hard to justify the extent of the share price fall on the basis of the downgrade alone, the slowdown in the 10 weeks feeds into broader concerns about the state of the luxury goods market and brings into question the high ratings commanded by such companies.
Particularly pertinent are fears about the potential damage that could be caused by a slowdown in China prompted by economic weakness and a change in tastes away from flashy shows of opulence. And a lack of visibility on future orders means things could easily get worse from here given global economic strains. Broker Seymour Pierce has gone beyond the guidance of the company and downgraded its full-year profit forecast by 12 per cent to £390m.
Burberry's second-quarter slowdown is also a concern for other luxury goods players, which have also benefited from breakneck emerging-market growth. UK luxury leather goods specialist Mulberry has seen its shares fall 5 per cent to 1,297p. Meanwhile, continental rivals have also been hit - Prada is down 6 per cent, Hermes 1.5 per cent and LVMH 5 per cent.
