Burberry sees key market'¨China in return to growth

The group, famous for its Yorkshire-made trenchcoats and cashmere scarves, posted flat like-for-like sales, an improvement on the four per cent fall in the previous three months.

Retail revenue grew by one per cent to £603m helped by strong demand in Europe, particularly in Italy, Spain and Germany.

Burberry’s finance director Carol Fairweather said the group’s French operations suffered a hit following the Paris terrorist attacks.

“Certainly in Paris we saw a decline following that. It affected sentiment generally,” she said.

The results were in line with analysts’ expectations, helping to ease concerns over a slowdown in the luxury sector, which has been hurt by a fall in Chinese consumer spending.

“We were pleased to see a return to positive growth in China,” said Ms Fairweather.

Chinese shoppers in Hong Kong and mainland China account for between 30 and 40 per cent of Burberry’s global revenue. The group was hit by tough trading in Hong Kong, where sales declined by more than 20 per cent.

The company is expected to report a full year pre-tax profit of £428m, down from £455.8m in the previous year.

Christopher Bailey, the Halifax-born chief creative and chief executive, said: “In a tougher environment than expected, our sustained focus on growth and cost control drove a number of positive results over the quarter.”

Best selling products over Christmas were ponchos, scarves, leather goods, lightweight cashmere trenchcoats and dresses, reflecting the mild winter weather in Europe and the US.

But Mr Bailey cautioned the outlook for the luxury sector remains “uncertain”, adding that the third quarter retail sales performance was still below internal forecasts.

Analysts at Jefferies said the group’s trading was “better-than-feared”, but experts at Liberum warned Burberry would come up against tougher sales comparatives in its fourth quarter.

Burberry said it will soon start work on a new manufacturing and weaving facility for its heritage trench coat in the heart of Leeds.

The site, on the South Bank of Leeds, will employ more than 1,000 people when it is completed in 2019.

Burberry is spending an initial investment of £50m on the site.

“It’s early days but we are very excited about the Leeds facility. It’s great to be investing in the UK,” said Ms Fairweather.

The site will allow Burberry to continue to produce its most iconic product, the heritage trench coat, in Yorkshire where the brand has been manufacturing for over half a century.

The new facility will replace the two existing manufacturing and weaving centres in Castleford and Cross Hills, in West Yorkshire.

The plan is for all the teams from Castleford and Cross Hills to move to the new site, bringing all employees together under one roof. The company employs 700 staff in Castleford and around 70 in Cross Hills.