Stabilising pound deters bargain hunters, knocking sales at established UK stores down 8%
Burberry has reported a slump in sales as a luxury tourism shopping spree in the UK comes to an end.
The British brand known for its trenchcoats said sales at established UK stores were down by about 8% in the three months to 31 December, largely because of a drop in the number of high-spending visitors from China.
Global retail sales at Burberry’s established stores rose 2%, disappointing expectations in the City of a 3% rise.
There was also disappointment that the brand did not announce a new creative director to replace Christopher Bailey, who will leave in March after 17 years.
Shares in Burberry fell 8% to £16.43 in early trading on Wednesday after the company said Chinese tourists, who made up a large proportion of overseas shoppers in the UK last year, were heading elsewhere, including Japan.
A year ago, Burberry’s UK sales rose by 40% as overseas bargain hunters made the most of the slump in sterling after the Brexit vote.
Some shoppers consider exchange rates and travel fees when deciding where to buy luxury handbags or trenchcoats, which can cost more than £1,000 each. The fall in the value of the pound made the UK an attractive shopping destination in late 2016, but sterling has since stabilised.
Burberry said it remained on track to deliver profits because it would make £60m of cost savings this year. Sales continued to rise in China, the US and the rest of Europe. Total reported sales fell by 2% as Burberry closed 1% of its retail space, including an outlet in Asia.
Marco Gobbetti, who took over as chief executive in July, said: “We are building on strong foundations and are fully focused on the successful delivery of our multiyear plan to position Burberry firmly in luxury and deliver long-term sustainable value.”
Gobbetti wants to spend about £50m a year reinventing Burberry as a “super-luxury” brand.