Burberry is cutting 15-20% of its product lines, after the luxury fashion brand’s profits fell by a quarter in the first half of the year.
The company’s profits were hit by dwindling tourism spending in Europe and tougher trading in the US and Hong Kong. It will focus on core products and new ranges as it heads into the Christmas period. Among its current bestsellers is the new satchel-style Bridle bag from its September runway show. The cheapest version starts at £1,200.
Burberry shares were down 2% after it reported a 24% fall in adjusted pre-tax profits, to £146m in the six months to 30 September. Profits were hit by declining sales in some of its key markets as well as costs associated with expiring Japanese licences.
The retailer revealed last month that total sales were down 4% over the first half of the year at £1.16bn. A 30% surge in UK sales as travelling customers took advantage of the sharp drop in the value of the pound since the Brexit vote was not enough to offset weakness elsewhere. Sales fell in mainland Europe as tourism numbers dwindled amid heightened fears of further terror attacks.
Christopher Bailey, chief executive and chief creative officer of the brand, said: “In May, we outlined plans to evolve how we work as a business and to drive Burberry’s future growth in a rapidly changing luxury environment. Since then, we have made good early progress towards realising the significant opportunities ahead of us. We remain on track to deliver our financial goals.”
Analysts at Citi said the outcome of the US presidential election and exchange rate volatility could potentially weigh on consumer confidence and global demand for luxury goods.
“We see political risks as a potential source of disruption to luxury demand in some of the world’s key luxury markets (US, France, Germany, Italy, Hong Kong) where key elections and political events are taking place,” they said.
Analysts at Morgan Stanley said the key message was that Burberry’s expectation of full-year adjusted pre-tax profit was unchanged at £450m.
