Burberry warns over sterling impact

Soaring demand for luxury goods in China helped Burberry set record annual revenues and profits, but the fashion chain warned of lower profits next year if the pound remained strong.

Burberry warns over sterling impact

Soaring demand for luxury goods in China helped Burberry set record annual revenues and profits, but the fashion chain warned of lower profits next year if the pound remained strong.

The 158-year-old firm – known for its camel, red and black check pattern – met market forecasts as it posted an adjusted pre-tax profit up 8% to £444.4 million on sales 17% higher to £2.33 billion.

The London-based company said revenues were driven by 11% sales growth in China as well as strong sales of large leather goods, menswear and outerwear, which includes the brand’s signature trench coats.

The group said footfall at its stores remained weak, but this was offset by an improved customer conversion rate, which saw retail sales lift 12%.

In Europe and the Middle East, the firm said its retail trading was robust in the UK, France and Spain, but weaker in Italy and the United Arab Emirates.

In total Burberry runs 215 main stores, 227 concessions and 55 outlet stores.

The results are the first since chief creative officer Christopher Bailey succeeded Angela Ahrendts as chief executive in May after she left to join computer firm Apple.

He said the results reflected the firm’s “outstanding” brand momentum but that he was mindful of economic uncertainty and currency pressures.

The company said that if exchange rates remained at current levels the impact on overall profits in 2015 would be material.

As an example the firm said if it faced current exchange rates throughout the whole of the year profits would have been £40 million lower, while its adjusted operating margin would fall from 17.5% to around 16.3%.

The firm also added it would target growth in Japan this year, which saw it generate revenues of £25 million in 2014. The group said it plans store openings in Tokyo and Osaka as well as adding around ten concessions a year in 2016 and 2017, in a bid to hit annual sales of £100 million by 2017.

Hargreaves Lansdown head of equities Richard Hunter said: “It appears that the newly appointed chief executive has inherited a company which is in fine fettle.”

Burberry also said that easyJet airline chief executive Carolyn McCall will join its board as a non-executive director and member of the audit, remuneration and nomination committees from September.

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