LONDON – The U.K., once-buoyant due to the weaker pound, dragged Burberry’s third-quarter retail sales down 2.2 percent to 719 million pounds, although sales rose 1 percent on an underlying basis.
The European region as a whole declined by a low, single-digit percentage, impacted by U.K. comparatives as the benefits of the weaker, post-Brexit referendum pound wane.
The U.K., Burberry’s base and one of its most important markets, had notched 40 percent growth in the prior year, boosted by bargain-hungry tourists flooding into shops after watching the pound fall.
The company said in a trading update on Wednesday that full-year guidance for operating profit remained unchanged for fiscal 2017-18, which ends March 31.
The third-quarter decline rattled the markets, with Burberry’s share price falling 7.2 percent to 16.56 pounds in late morning trading.
Asia-Pacific and Mainland China delivered mid-single-digit percentage growth in the three months to Dec. 31, while Hong Kong was flat and Korea saw a slight decline in sales.
Continental Europe grew and the Middle East improved during the three months, while the Americas saw low single-digit percentage growth. Tourist spending in the region registered a slight improvement versus the second quarter, the company said.
Direct-to-consumer digital growth was led by Asia Pacific, and mobile transactions in the period represented about 40 percent of revenue.
“We are making good progress embedding our strategic vision into the organization and remain on track to meet our full-year profit target,” said chief executive officer Marco Gobbetti.
“We are building on strong foundations and are fully focussed on the successful delivery of our multi-year plan to position Burberry firmly in luxury and deliver long-term sustainable value,” he added.
In November, Gobbetti had already warned the markets of a slow start to his five-year strategic plan, telling investors that sales and adjusted operating margin would be flat as the company reshapes itself.
Gobbetti also said he doesn’t want to make too many creative changes until Christopher Bailey’s successor is in place and able to articulate his or her vision. Bailey is stepping down March 31.
Gobbetti said his aim is to reverse the trend of slower growth compared with Burberry’s luxury peers, and over the next five years he is looking to achieve “high-single-digit” revenue growth — higher than the 4 to 5 percent that Bain has projected for the sector in the medium term — and “meaningful” operating margin expansion.