Burberry hit by Asia-Pacific slowdown but digital strength, heritage and ponchos please Bailey

The near stranglehold Asia-Pacific’s strength (or weakness) has on the fortunes of the luxury sector is even leaving its mark on Burberry. The usually robust UK fashion house Wednesday reported a slowdown in Q1 same-store sales growth amid weaker demand in the expansive region, and Hong Kong in particular. Its shares were down 2.3% in early morning London trade.

OK, a comps rise of 6% in the three months to end-June is one many retailers would envy. But compare that to the 12% rise reported for the same period last year, and alarm bells ring.

Although retail revenues rose 10% year-on-year to £407m ($636.87m), or up 8% currency-neutral, there was a low single digit decline in the Asia-Pacific, hit by a “further deceleration in Hong Kong” and “a challenging luxury market.”

That compares with double-digit growth for the same period last year.

Mainland China comp sales grew by a low single-digit percentage and although Japan saw “exceptional growth”, this was off a smaller retail base.

Elsewhere, the news was altogether brighter with the Americas seeing single digit percentage comps growth, although a year ago the rise was in the double-digits. It noted footfall recovered throughout the quarter after a soft start.

EMEA growth hit the expected Burberry high with double-digit percentage same-store sales growth, up on a year ago, boosted by free-spending tourists in France, Italy and Spain in particular.

Burberry’s focus on all-things digital means that particular channel continues to “outperform”, with mobile penetration of sales more than tripling compared to the prior year, “supported by the investment we made in improved mobile functionality last year”, it said.

On the product front, Burberry continued to post strong growth in its core heritage trench coats and cashmere scarves, while the poncho maintains its appeal.

“Innovative marketing strategies focused on our British heritage, reinforcing our unique global brand positioning,” it noted.

Chief creative and chief executive Christopher Bailey said: “We are pleased with our performance in this first quarter. This reflects our on-going emphasis on serving our customers ever more effectively on and offline, and continued innovation in design and marketing – particularly around the iconic, British-made products that performed so well in the period.

While mindful that the external environment remains challenging, we will continue to focus on growth opportunities across channels, regions and products, with exciting plans for the year ahead.”

For the 2016 fiscal year, net new space is still expected to contribute low single-digit percentage growth to total retail revenue, with 15-20 mainline store openings and a similar number of closures.

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