Blog: Burberry in check
Leonie Barrie | 16 January 2008
Despite reporting its fifth consecutive quarter of double-digit growth yesterday, with third-quarter sales up 26%, shares at luxury goods group Burberry still slumped 16%.
Investors were spooked that like-for-like sales growth was down to 6% – nearly half the rate posted in the first half of the year – and that retail sales, already “modestly behind plan”, were boosted by discounting. To cap it all, the company hinted that earnings guidance is likely to come in at the lower end of forecasts.
The global fashion house said its problems were partly due to glitches in its retail IT system, which left some stores short of stock, and that it had achieved a “good showing in a tough retail environment”.
But Burberry would be unwise to think itself insulated from the worst effects of the global credit crunch just because of its wealthy customer base.
While it’s true that it may only have limited exposure to the beleaguered UK high street, analysts are particularly uneasy about Burberry's exposure to the US, where it generates a third of its revenue.
In the US, the housing slump is likely to turn luxury consumers off indulgent buys – particularly given that the sector is increasingly reliant on aspirational customers who will have no alternative but to cut costs.
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