Burberry falls out of fashion

11 Sep 2012 | News - Comment now

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Burberry falls out of fashion

The stock market has wiped nearly a fifth off the value of Burberry (LON:BRBY) after the luxury group issued a profit warning.

In a statement, Burberry said that it ‘currently expects adjusted profit before tax for the 12 months to 31 March 2013 to be around the lower end of market expectations.’ The news sent shares in the retailer diving to £11.19, 18.6 per cent down in early trading.

Angela Ahrendts, Burberry’s chief executive, explained that ‘the external environment is becoming more challenging.’ She assured investors that ‘given this background, we are tightly managing discretionary costs and taking appropriate actions to protect short-term profitability.’

The update from Burberry warned that, despite sales in new stores delivering 6 per cent growth in the ten weeks to 8 September 2012, ‘comparable store sales were unchanged year on year, with a deceleration in recent weeks.’ This follows growth of 14 per cent in the prior quarter.

The fashion house had hitherto been on a meteoric course. Having been in decline until 2008, when its share price hit £1.71, it reached a peak £15.65 in April this year.

Kate Calvert, an analyst at Seymour Pierce, warned that other participants in the luxury market could be next to suffer. She said she ‘would not be surprised if other luxury players are seeing similar trends.’

Burberry’s rivals have indeed already seen their share prices impacted. Mulberry (LON:MUL), a handbag company, is down 4.3 per cent to £13.00. In Europe, the parent groups of Louis Vuitton, Gucci and Cartier all fell by more than 4 per cent.

Related topics: Consumer, UK equities Burberry Group

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