Burberry bounces back as Asian retail returns to growth

Boosted by a return to growth for the Asia Pacific region but with the Americas still in decline, Burberry grew underlying retail sales 4% in the third quarter.

In the three months ending December, the fashion retailer made revenues of £735m that were 22% higher than the same period last year thanks to the significant currency shifts, with like-for-like sales up 3%.

The FTSE 100 group said the expected full year effect from exchange rate movements will be around £125m, based on current levels.

In Asia Pacific, where a slowdown since 2015 has been a major drag on Burberry, there was low single-digit percentage growth, following the low single-digit decline reported in the first half of the financial year.

With mainland China having begun to improve in the first half with mid single-digit percentage growth, acceleration was now reported up to high single-digits.

Hong Kong, where negative footfall in the first half had led to a double-digit decline, there was an improvement to a low single-digit percentage comparable sales decline, with positive conversion offsetting the majority of the footfall decline

Excluding Hong Kong and Macau, comparable sales in the region were positive.

Americas saw comparable sales remain down by a low single-digit percentage decline, with spending by domestic and travelling luxury customer demand remaining "uneven".

The Europe Middle East India and Africa region delivered double-digit sales growth, up from low single-digits in the first half, with "continued exceptional performance" in the UK with comparable sales growth of around 40%.

Chief creative and chief executive officer Christopher Bailey, who will hand the CEO reins to Celine's Marco Gobbetti in July, said there was no change in the outlook for retail, wholesale and licensing revenue since November's interim results and that cost cutting plans remained on target.

"With a record number of views of our festive film and strong demand for new products in our collections, this third quarter improvement reflects early progress from our plans to drive Burberry's performance for the long term," he said.

"We continue to take action to position the business for growth over time and our plans to enhance efficiency are on track."

The shares were initially little moved on the news, though by 1100 GMT they were up 2% to 1,627p.

Analyst George Salmon at Hargreaves Lansdown said investors will be pleased to hear that the latest collection has been well received, "but then again design has never been the group’s problem...the crucial thing for Burberry is how demand in the Far East holds up".

He said growth returned in Asia-Pacific, customers jumping on planes to the UK to take advantage of the extra buying power from sterling’s weakness and impressive progress with the refreshed website provided "plenty of encouraging signs".