LONDON — The weaker sterling gave Burberry a first-quarter boost, pushing reported retail revenue up 4 percent to 423 million pounds, or $609 million, although sales remained flat on an underlying basis.
Burberry said comparable sales declined by 3 percent, while net new space contributed 3 percent, with its three main regions notching a low single-digit percentage comparable sales decline.
The company said Hong Kong showed “some improvement” compared to the fourth quarter of last year, but continued to see a double-digit percentage decline in comparable sales. In mainland China, comparable sales were broadly unchanged year-on-year. Japan saw weaker tourism, offset in part by growth from domestic customers.
Excluding Hong Kong and Macau, comparable sales in the first quarter in Asia-Pacific were positive, the company said.
In midmorning trading, Burberry shares were up 3.7 percent to 12.48 pounds, or $16.52.
Burberry, like other big luxury goods brands, have been suffering sales declines in Hong Kong and Macau due to a government crackdown on bribery and a decline in traffic from mainland Chinese tourists.
The company said the U.K., its largest market in Europe, and the Middle East improved in the final weeks of the quarter to deliver mid single-digit percentage comparable growth. Following the Brexit vote in June, the British pound crashed, sending foreign tourists flying into shops and onto web sites.
Although the pound later recovered, it is still trading at a discount to the euro and the dollar, fueling retail sales at many British brands.
As reported, Helen Brand of UBS said the weaker pound would give the struggling Burberry some relief. She had predicted that first-quarter retail sales would be virtually flat year-on-year.
There is more good currency news to come: Burberry said Wednesday it now expects to see a foreign exchange bump of 90 million pounds, or $118 million, compared with the 50 million pounds, $72 million, it had projected in April.
Dollar figures have been converted at average exchange rates for the periods to which they refer.
In the quarter, Continental Europe remained depressed, in particular in France and Italy, with double-digit declines in sales to traveling luxury customers. The company said the declines were offset in part by growth from domestic consumers in all major markets.
The Americas continued to experience uneven demand from domestic customers, while spend by the traveling luxury customer remained down by a double-digit percentage, the company said.
Christopher Bailey, Burberry’s chief creative and chief executive officer, called the external environment challenging, and said the company remained focused on managing the business with agility and pursuing its new strategic plan, which is aimed at long-term growth.
“These plans are now well underway and on track to deliver our financial goals. This progress, together with our recent management appointments, gives us real confidence for the future,” said Bailey who next year will be relinquishing his ceo role to Marco Gobbetti, currently chairman and ceo of Céline. Chief financial officer Carol Fairweather will be stepping down and making way for Julie Brown, who will take on the joint role of cfo and chief operating officer.
Burberry said the external environment remains challenging and underlying cost inflation pressures persist. Since May, the company said its outlook for wholesale revenue, particularly in the U.S., is more cautious for both the first and second halves of the year, in fashion and beauty.
The company is now projecting total wholesale revenue at constant exchange rates in the six months to 30 September 2016 to be down by more than 10 percent on the same period last year. “This reflects significantly tighter inventory control by U.S. wholesale customers, continued cautious ordering in other regions, and the “elevation of beauty distribution” in key markets, Burberry said.
In the three months to June 30, fashion outperformed replenishment product, with apparel and accessories doing particularly well. Handbag sales were driven by the runway rucksack, and lightweight outerwear also performed well, in particular cashmere trench coats and new men’s wear styles.
In terms of sales and consumption trends, Burberry said mobile delivered the majority of the growth, with about 60 percent of traffic to its online store coming via a mobile device. The company’s single inventory model has been further expanded, with about 90 stores now live globally, improving stock availability for all online markets.
Since May, the company has been on a mission to simplify its operations, cut costs and shift the retail focus away from tourists to locals and a younger, digitally engaged fan base. Burberry is also seeking to clarify its offer — slashing 15 to 20 percent of its product assortment in the coming year, with more cuts to come.
It will also merchandise and promote seasonal products in a clearer way in store, with a focus on key products, and streamline its internal organization.