Burberry Group PLC on Tuesday reported a 4% decline in underlying first-half revenue, sending shares down sharply, as outgoing Chief Executive Christopher Bailey continued struggling to turn around persistent weak sales in Hong Kong and the U.S.
Wholesale revenue from channels like department stores was markedly worse than analysts had expected, plunging 14%. Burberry attributed the drop partly to its increased focus on its own stores rather than wholesale, where it has less control over aspects such as the price and presentation of its products.
Chief Financial Officer Carol Fairweather also blamed poor demand from U.S. department stores, saying they “are having a difficult time.” Burberry shares were down 5.7% to £14.26 in early London trading.
Bailey got some breathing room from the pound’s 19% slide since Britain’s June 23 vote to leave the European Union. Including currency swings, revenue for the six months ended Sept. 30 came in at £1.16 billion ($1.42 billion), up 5% from a year earlier.
Before Tuesday’s downdraft, the British luxury house’s shares had soared 36% since the Brexit vote, as revenue earned in big overseas markets like the U.S. and China gained value when translated into pounds.
Chinese visits to U.K. stores rose by about 20% in the second quarter, Fairweather said on a call with reporters. But the company continued to report lower sales in Hong Kong and the U.S., both markets that have seen sales decline for a string of quarters.
Following increasing pressure from investors, the company recently named Céline Chief Executive Marco Gobbetti to replace Bailey, who will remain design chief.
(Source: The Wall Street Journal)