Burberry plunges on sales slowdown

11 Jul 2012 | News - Comment now

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Burberry plunges on sales slowdown

Shares in Burberry (LON:BRBY) have slumped after the fashion retailer reported a slowdown in quarterly sales growth.

The luxury goods firm posted total revenue in the first quarter of £408 million, up 11 per cent on an underlying basis but undershooting consensus analyst expectations of £418 million.

The sales growth was also lower than the 15 per cent seen in the previous quarter and far lower than the 30 per cent increase to £367 million seen in the equivalent quarter last year.

The firm claimed that the sales growth was led by the UK, France, Germany and Greater China, but the slowdown in China, a pivotal market for Burberry, has affected the firm’s sales.

Shares in Burberry are currently down 6.39 per cent at 1,202p at 11.00am, leading the fallers on the FTSE 100.

Angela Ahrendts, chief executive officer of Burberry, claimed that the firm had ‘delivered a robust first quarter’.

She added, ‘Building on our balanced business model and strong operational foundation, we continue to invest in our retail, digital and marketing strategies to drive long-term sustainable growth, while remaining responsive to the changing external environment.’

Broker Bank of America Merrill Lynch responded to the results by cutting its target price from 1,600p to 1,400p, though it kept its ‘neutral' recommendation.

The broker claimed, ‘Consensus expectations of a 15 per cent earnings per share growth for 2013 look demanding in our view considering the 11 per cent reported revenue growth achieved in the first quarter and management guidance of modest operating leverage.

‘Against a challenging comparison basis throughout the year, the likelihood of retail like-for-likes accelerating materially in coming quarters is limited in our view in a challenging and volatile macro-economic environment.’

Nomura and Investec maintained their ‘buy’ recommendations on the stock, despite the slowdown, although Nomura cut its target price from 1,530p to 1,450p.

Related topics: Burberry Group, China, Retailer, Sales growth

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