Burberry value rocked by profit warning amid China slowdown

Shares in luxury clothing and accessories group Burberry tumbled by almost 21 percent Tuesday after the British firm issued a surprise profits warning which analysts blamed on China's economic slowdown.

Analysts warned that the group's poor second quarter could signal that the high-end luxury goods industry was no longer immune to weakness in the global economy, as Burberry's shock announcement dragged down the wider fashion sector.

Burberry said in a trading update that like-for-like sales, stripping out the impact of new floor space, ground to a halt in the 10 weeks to September 8 and have started to fall.

As a result, Burberry warned that annual profits would be at the bottom end of analysts' expectations of between £405 million and £445 million.

In reaction, the group's share price closed down 20.9 percent to 1,088 pence on London's FTSE 100 index of top companies, which ended flat. It meant Burberry saw about £1.0 billion wiped from its market value in just one day.

In Paris, shares in luxury fashion groups LVMH and PPR slid by 3.36 and 2.07 percent respectively, to end at 127.80 and 125.25 euros. The overall French market won 0.89 percent.

"Burberry spooked the market announcing a material downturn in second quarter retail sales," Seymour Pierce stockbrokers said in a note to clients.

"This seems to be macro driven," it added.

In a statement, Burberry said it "expects adjusted profit before tax for the twelve months to 31 March 2013 to be around the lower end of market expectations."

The company, famous for its trench coats and trademark red, camel and black check design, had thus far bucked the gloomy trend in the wider retail sector due to its exposure to emerging markets like Asian powerhouse China.

Jon Copestake, retail analyst at the Economist Intelligence Unit, said: "Burberry's warning could signal a retrenchment for luxury firms as Chinese growth slows. However, reliance on China is just one of a number of factors. Weakness in the eurozone remains influential."

In recent years, Burberry has been at the forefront of the global surge in demand for luxury goods, bolstered by soaring sales in China. At the same time, many mid-market retailers have struggled for survival amid poor economic conditions.

Burberry chief executive Angela Ahrendts on Tuesday said that "the external environment is becoming more challenging."

She added in the group's earnings statement: "In this context, second quarter retail sales growth has slowed against historically high comparatives."

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • What can void a new car warranty? James Deakin - Wheel Power
    What can void a new car warranty?

    "I was denied warranty once for changing my horn!" One very annoyed reader wrote. "I was told that placing a backup camera will void my warranty" said another. The others are best left in my private inbox as Yahoo! have a swear jar in the office that I do not feel like donating this week's pay to. Continue reading → …

  • Docu exposes destruction of PH marine resources VERA Files - The Inbox
    Docu exposes destruction of PH marine resources

    By Kiersnerr Gerwin B. Tacadena, VERA Files “Gutom (hunger),” Sen. Loren Legarda said is what’s in store for the Filipino people if destruction of the country's marine resources is not stopped. Legarda, chair of the Senate committee on Environment and Natural … Continue reading → …

  • ‘Yolanda’ fiberglass boats modern-day Noah’s ark VERA Files - The Inbox
    ‘Yolanda’ fiberglass boats modern-day Noah’s ark

    By Jane Dasal, VERA Files If you want to save the earth, build a boat. That's what a group of environmentalists is saying, especially if you want to save both the forests and fishermen affected by supertyphoon “Yolanda” (Haiyan). “Haiyan … Continue reading → …

POLL
Loading...
Poll Choice Options