LUXURY RETAILER Burberry said sales of its iconic, Yorkshire-made trench coat have held up well despite a sharp slowdown in Hong Kong and China as economic woes hit demand for luxury goods.
Burberry has simplified the design of the Castleford-made trench coat, returning it to its classic Yorkshire heritage after a disastrous few years when the brand was criticised for being “chavvy”.
Carol Fairweather, finance director of the 159-year-old brand, said: “We put our heritage trench coat under a spotlight and really simplified it. We brought it down to three colours and now we’ve expanded it to red and navy. We’ve also brought out a lightweight trench coat in a cashmere.
“We’ve invested in and grown the workforce in Castleford.”
She was speaking after Burberry missed sales growth forecasts as the group warned of an increasingly challenging environment for luxury goods.
The group is highly reliant on Chinese customers - they account for around a third of its sales - and the weak Chinese economy has taken its toll. Chinese shoppers have grown increasingly cautious this year after the economy weakened, the currency was devalued and its stock market took a tumble.
Burberry has drawn up plans to cut costs to offset slowing sales growth and it saved £20m in discretionary costs last year, cutting back on travel expenses and reining in recruitment.
The fashion house said trading deteriorated in its second quarter. Underlying retail revenues rose two per cent in the six months to September 30 - a marked fall on the eight per cent growth reported in the first half.
Like-for-like sales edged up one per cent overall in the half-year, but fell four per cent in the second quarter and the group said it saw a drop across Asia Pacific as Chinese customers reined in spending.
Retail analysts have cut their full-year profit forecasts for Burberry in recent months after it warned of a tough luxury market, with expectations falling from £462m to £445m.
Burberry said annual profits would be broadly in line with the recently trimmed forecasts, but this takes into account action to cut costs across the group.
It also assumes a reduction in staff bonuses.
Halifax-born Christopher Bailey, chief executive and chief creative officer of Burberry, said: “The external environment became more challenging during the half, affecting luxury consumer demand in some of our key markets. In response, we have intensified our focus on driving sales and productivity, while taking swift action on discretionary costs.
“While mindful of this external volatility, our plans for the festive season position us well to return to a more positive sales trend in the all-important second half.”
The group said mainland China comparable store sales dropped only slightly in the second half, but Hong Kong has been hit hard as it has not only seen a drop in spending from Chinese visitors it has also seen a fall in tourist numbers following last year’s lengthy pro-democracy protests.
Burberry said it hopes that like-for-like store sales will return to “mid single digit” growth in the second half, with a boost from the key Christmas period.
Ms Fairweather said there are no plans to move out of China.
“We are a global business,” she said.
“Our Chinese customers are very important. We manage the business for the long term.”