At first glance, there was good news from Burberry today. The 158-year-old fashion firm reported 14% underlying growth in the six months to September 30th, with first half revenues standing at £1.1bn.
The impact of this year’s steroid-strong sterling meant actual growth was more like 7%, but that’s hardly bad. Besides, the pound’s recent weakening has helped the company ease its projected full-year reduction in profit from £55m to £25m for the 2014 financial year. And yet, despite this, shares in the company were trading 4.5% down at 1,413p this morning.
What’s got investors spooked is the waning demand for the luxury products over the summer. Comparable sales growth fell from 12% in the first quarter (April-June) to 8% in the second (July-September), driven by what Burberry calls a ‘more difficult external environment’.
Specifically, they mentioned ‘more cautious demand from travel retail and European customers’, and a ‘softening in growth from Chinese consumers, both at home and when travelling’. Essentially, with Europe teetering on the edge of recession (again) and China’s runaway consumer demand slowing down, shoppers are reining in their £1,000 leather handbag habit.
It’s at times like this that Burberry must wish the Chinese government hadn’t cracked down on luxury gift-giving last year. Still, it could be worse, as similarly-named British luxury goods company Mulberry (who British model of the moment Cara Delevigne also can't seem to work her magic for) can attest to.