Burberry's profits fall following slowdown in demand for luxury goods

The luxury fashion house was hit by a 12 per cent drop in store sales across American markets, where it continues to see “a relatively broad-based decline” in retail customers.

Store sales across Europe, the Middle East and Africa rose 4 per cent for the full year but dropped 3 per cent in the first three months of this year, as the region initially benefited from tourist growth but struggled later with pressure from local consumer spending.

Meanwhile, strong sales in Asia earlier in the year were blunted by a 17 per cent drop in the fourth quarter, as demand waned in mainland China.

Burberry has propped up its sales figures with an increasing reliance on its wholesale business in recent years, which helped revenue remain relatively stable, at only a 4 per cent annual drop to £2.97bn.

But analysts have said its over-reliance on wholesale has affected the brand’s image, despite driving revenue.

As a result, it recently embarked on a drive to “refocus” the brand’s image, said chief executive Jonathan Akeroyd, which he reported “good progress” on today.

He said: “Executing our plan against a backdrop of slowing luxury demand has been challenging.

“While our FY24 financial results under-performed our original expectations, we have made good progress refocusing our brand image, evolving our product and strengthening distribution while delivering operational improvements.

“We are using what we have learned over the past year to fine tune our approach, while adapting to the external environment.

“We remain confident in our strategy to realise Burberry’s potential as the modern British luxury brand and in our ability to successfully navigate this period.”

The luxury fashion giant warned the “challenging” environment would continue over the coming months, and that it planned cost saving measures to help it combat the impact of inflation.

Nonetheless, wholesale revenue is estimated to fall about 25 per cent in the six months to September as the firm increases control of distribution channels.

It also said that due to changes in foreign exchange rates, it expects a currency headwind of about £30m to revenue and £20m to profit next year.

Burberry employs around 1,000 staff across its Yorkshire manufacturing sites in Castleford and Keighley and its office in Leeds. The company has said it is committed to manufacturing in the UK and is very proud of its team in Yorkshire.

Yanmei Tang, Analyst at Third Bridge, said: “Burberry is among the brands that have been affected by a slowdown observed across the wider luxury industry.

"High-end customers become pickier about what they buy.”

"Over-reliance on wholesale has harmed the brand's image and margins, despite boosting sales.”