Burberry third quarter sales hit by Hong Kong slump

14th Jan 2016 07:03

(ShareCast News) - Luxury fashion retailer Burberry said underlying third quarter sales rose 1% to £603m, with comparable sales unchanged year-on-year against a fall of 4% in the second quarter - below the company's internal expectations as vital Hong Kong sales slumped."In what remains a challenging external environment, and ahead of Lunar New Year, we currently expect adjusted profit before tax for FY 2016 to be broadly in line with market forecasts, supported by a further reduction in the performance-related pay charge, additional discretionary cost savings and an FX benefit," the company said in a trading statement.Comparable sales in Burberry's key market of Hong Kong slumped again by more than 20%, driven by a further significant decline in footfall.Growth resumed in both mainland China and Korea, while Japan remained strong with around 50% comparable sales growth. This contributed to a "mid-single digit percentage" rise in Asia-Pacific sales.Burberry said the outlook for its market into 2017 was "uncertain and underlying cost pressures persist for the sector""Against this background, we are accelerating our productivity and efficiency agenda, especially looking at our ways of working," Burberry said."We are also addressing how to optimise future organic revenue growth opportunities, the resulting investment plans and our capital structure. Further updates will be provided at our preliminary results in May 2016."Full year retail and wholesale profits would be improve by £10m if exchange rates remain at current levels compared with "no material benefit" forecast in October.Licensing revenue is still forecast to be 40% lower at constant exchange rates due to the expiry of the Japanese Burberry licences."For 2016, we continue to expect double-digit percentage growth from the global product licences and about £25m from Japan. At current exchange rates, the impact of the movement in the sterling/yen rate on reported licensing revenue in FY 2016 is not expected to be material," Burberry said.