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Burberry warns markets getting tougher

2014-10-15 14:00 Global Times/Agencies Web Editor: Qin Dexing

British luxury brand Burberry warned that conditions in some of its markets, including China, had worsened in its second quarter, overshadowing a 14 percent increase in the group's first-half sales.

Shares in the 158-year-old fashion company, known for its raincoats with camel, red and black check patterned linings, fell up to 6 percent on Tuesday after Burberry said the "external environment [was] becoming more difficult."

It said this was expected to result in slight downward pressure on its retail and wholesale profit margin.

The luxury sector was also dented on Tuesday by a third profit warning this year from smaller rival Mulberry.

The global luxury goods industry is facing a testing time, with the Ukraine crisis hitting demand in Russia and a slowdown in China, where a government crackdown on corrupt gift-giving has hurt luxury sales.

Burberry's CFO Carol Fairweather said the firm was aware of these issues as well as war in the Middle East and the impact of the Ebola virus on travel but was confident it was outperforming rivals.

"In Q2 we still saw high single-digit [sales] growth in Asia, and from the -Chinese, in China and when they were traveling," she told reporters.

"We still saw good growth from [the] Chinese. It just wasn't double digit as it had been in previous quarters. We believe that will probably be outperformance compared to our peers."

Burberry's first-half to September 30 revenue of 1.1 billion pounds ($1.76 billion) reflected a strong performance across all regions and continued digital growth.

Its first-half performance overall was driven by retail sales growing 15 percent to 748 million pounds - bang in line with analysts' average forecast, with comparable sales growth of 10 percent.

For its second half to March 31, 2015 Burberry expects wholesale revenue, which is sales to third parties such as department stores, to be down by a "mid single-digit percentage," reflecting a more cautious approach from customers selling to the European consumer and in Asian travel retail markets.

But analysts at Nomura raised their 2014-15 pretax profit forecast to 452 million pounds from 440 million pounds, after taking into account the currency guidance and the slowdown in China growth.

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