Burberry Issues Profit Warning as Luxury Slowdown Hits Sales
LONDON – Burberry has issued a profit warning as the global decline in luxury demand continues to impact sales. The renowned British fashion house released an unscheduled trading update on Friday, revealing that it expects adjusted operating profit for the financial year ending March 30 to be significantly lower than previously anticipated.
The company stated that it now forecasts adjusted operating profit to range between £410 million and £460 million below previous guidance. Additionally, based on current foreign exchange rates, Burberry expects a currency headwind of approximately £120 million to impact its full-year revenue figure and around £60 million on adjusted operating profit.
Jonathan Akeroyd, Burberry’s CEO, commented on the situation, saying, We are continuing to deliver the transition to our new modern British luxury creative expression, which began appearing in our stores in early autumn. However, executing this vision has become more challenging in light of the slowdown in luxury demand.
Akeroyd acknowledged a further deceleration in December trading, leading to a downward revision of their full-year results. Nevertheless, he expressed confidence in Burberry’s long-term strategy to unlock its potential and emphasized the company’s commitment to achieving its £4 billion revenue ambition in the medium term.
During the 13 weeks ending on December 30, Burberry witnessed a 7 percent decline in reported retail revenue, amounting to £706 million. At constant exchange rates, this decrease was slightly reduced to 2 percent.
In November, the company had already alerted the markets to lower-than-expected sales and profits. Previously, Burberry had anticipated low-double-digit growth for the full fiscal year, with adjusted operating profit ranging from £552 million to £668 million. However, it now appears that the adjusted operating profit could land at the lower end of the consensus range.
Burberry’s CEO emphasized the unique challenges posed by the current complex macro environment affecting all regions simultaneously. In previous occasions, softness in one region could be balanced out by growth in another, enabling the company to maintain overall stability. However, the present situation demands a more comprehensive approach to mitigate the adverse effects of declining luxury demand worldwide.
As Burberry grapples with these challenges, the luxury fashion industry as a whole is closely monitoring the implications of this profit warning. The global slowdown in luxury demand has already impacted other luxury brands, highlighting a need for strategic adaptations to navigate through uncertain times. Investors, shareholders, and industry experts are keenly observing Burberry’s responses to unlock its potential and regain momentum.
The announcement by Burberry serves as a reminder of the volatile landscape that luxury brands are currently encountering. The company’s commitment to delivering a new modern British luxury creative expression signifies its efforts to adapt to shifting consumer tastes and preferences. The outcome of Burberry’s transformational journey will be closely watched, both within the fashion industry and beyond.
In conclusion, Burberry’s profit warning emphasizes the challenges imposed by the worldwide decline in luxury demand. As the luxury fashion industry navigates uncertain times, Burberry remains committed to executing its strategic plans and realizing its potential in the evolving market. The company’s ability to adapt to changing consumer preferences and recover from this setback will determine its future success.
