Burberry has warned of a "challenging" environment

Burberry has warned of a "challenging" environment

Fashion brand Burberry has revealed higher first-half earnings but warned of a "challenging" environment in key markets as group revenues remained unchanged on last year. 

The luxury retailer said adjusted pre-tax profit was up 3% to GBP152.9m (US$232.3m) in the six months to the end of September, from GBP152.3m a year earlier. 

The company said accelerated actions to cut costs, streamline its operations, and a GBP30m reduction in performance-related pay helped boost earnings. 

Total sales remained unchanged year-on-year at GBP1.1bn, with "more muted growth" recorded in the UK, which represents over one-third of the region's revenues. Burberry blamed the relative strength of sterling against the euro. Comparable sales edged up 1%. 

Growth continued globally from Chinese customers in the period, Burberry said, although this softened in the second quarter both in mainland China and when travelling. Within EMEIA strong double-digit percentage growth was achieved from travelling Chinese customers in continental Europe.

CEO Christopher Bailey described the performance as "robust", reflecting decisive action as the external environment became "more challenging in key markets over the period". 

He added: "We enter the second half mindful of this backdrop, but confident in our strongest-ever festive plans and emphasis on productivity and efficiency. Beyond these immediate priorities, we remain focused on building Burberry for long-term, sustainable growth and value creation. In an evolving luxury environment, we see compelling opportunities by channel, region and product, underpinned by the strength and distinctiveness of our authentic British brand." 

Last week, Burberry revealed plans to invest at least GBP50m (US$77.1m) in a manufacturing and weaving facility for production of its iconic trench coats in the UK. It also announced plans to phase out its Prorsum, London and Brit collections, bringing them under a new single 'Burberry' label over the course of next year.

Anusha Couttigane, senior consultant at Conlumino, believes that while Burberry hopes the move to unify its brands will improve efficiencies across product and processes, she questions how this will impact Burberry's brand positioning.