Nov 9, 2016
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Burberry cuts product lines to focus on newest fashions

Nov 9, 2016

British luxury brand Burberry is cutting 15-20 percent of its product lines, aiming to focus on its newest ranges as it battles to attract shoppers in a volatile luxury goods market.

The company reported a 24 percent drop in first-half underlying profit on Wednesday, in line with expectations.

Burberry winter 2016-17 - Spring-Summer2017 - Womenswear - Londres - © PixelFormula

Luxury brands have been struggling with slowing growth in Asia, a drop in tourist spending in Europe following a series of deadly attacks and competition from fast-fashion chains.

Burberry said in February it would move away from the traditional model of presenting seasonal ranges months ahead of their appearance in store, in favour of two collections a year that would be available in shops immediately.

Finance chief Carol Fairweather said on Wednesday the company was cutting back on product lines ahead of the key Christmas trading period and would give greater prominence to its newest products, such as the bridle bag that was a top seller from its September runway show.

"We are delighted with everything we have in place for (the) festive (season)," she told reporters.

Burberry, which has released a short film about its founder Thomas Burberry as its Christmas campaign, reported adjusted pretax profit of 146 million pounds, reflecting tougher trading in stores in the United States and Hong Kong.

The company had already announced a 4 percent drop in half-year sales to 1.16 billion pounds last month as weak demand in some overseas markets offset a surge in sales in its British home as tourists took advantage of a lower pound.

Shares in Burberry, along with other luxury groups such as LVMH (LVMH.PA), fell on Wednesday after Donald Drumpf's victory in the U.S. presidential election added to uncertainty over prospects for the global economy, analysts said. Burberry makes about 20 percent of its sales in the United States.

Citi analysts said they expected no change to forecasts for Burberry to make full-year adjusted pretax profit of 447 million pounds, but added the U.S. election and exchange rate volatility could knock consumer confidence and global luxury demand.

"We see political risks as a potential source of disruption to luxury demand in some of the world's key luxury markets (US, France, Germany, Italy, Hong Kong) where key elections and political events are taking place," they said.

Citi has a "neutral" rating on Burberry shares.

At 1100 GMT, the shares, which have risen 6 percent since the sales update on Oct. 18, were down 2.4 percent at 1,445 pence. French rival LVMH was down 2.9 percent.


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