Burberry sees sales rise ahead of new collection

Adwoa Aboah in a coral wool-cashmere coat
Courtesy of Burberry_Juergen Teller.jpg — Adwoa Aboah in a coral wool-cashmere coat Courtesy of Burberry_Juergen Teller.jpg

Burberry said sales rose 3 per cent in the 13 weeks to June 30 to £479m, but warned that tourist numbers are falling in the UK.

The firm said it remains committed to its manufacturing sites in Castleford and Keighley and it has no plans to develop the 10 acres of land it owns in Leeds next to the Grade I listed Temple Works building.

Last year Burberry let an option lapse on the Grade I listed Temple Works building in Leeds' South Bank. The firm said it still owns land in Leeds and reiterated that it is committed to Yorkshire.

The luxury fashion brand had been considering whether to develop the 10 acres of land it owns next to the building or whether to maintain the sites it currently owns at Castleford and Keighley in Yorkshire. Another option was to build a new green field site.

The firm said its Burberry Business Services site at 6 Queen Street in Leeds city centre is performing well and is already generating savings and helping to improve service.

The new office has brought together teams from finance, HR and procurement, customer services and IT and it is on track to employ 400 people by the end of the year.

Burberry warned that sales in the UK and Europe have been affected by weaker tourist demand, but Chinese tourists have driven sales in Hong Kong, Korea and Japan.

The Asia Pacific region drove growth in Burberry's digital sales, with mobile sales now making up the largest proportion of purchases made online.

Marco Gobbetti, Burberry's chief executive, said: "While we know it will take time to achieve our ambitions, our progress to date and the energy in and around the company give me confidence for the future."

Burberry is gearing up for the first collection from its new chief creative officer, Riccardo Tisci.

Mr Gobbetti is part way through repositioning the label to be more upmarket and is pinning his hopes on Mr Tisci, the former Givenchy star who has designed costumes for Beyonce and Madonna, to help transform the quintessentially British fashion house.

Pieces from the collection will be launched through "instant drops" from September.

Burberry is also collaborating with veteran British designer Vivienne Westwood, who is creating pieces for the brand that will be sold from December.

The fashion house is also working with Farfetch to aid the distribution of products sold online and said that the partnership was performing ahead of expectations.

Mr Gobbetti wants Burberry to catch up with faster-growing luxury goods rivals like Louis Vuitton and Gucci, but he has warned there will be little growth in revenue and operating profit while the plan is implemented.

Steve Clayton, manager of the HL Select UK Growth Shares fund, which has a 4.1 per cent position in Burberry shares said: "Burberry are talking bullishly about their performance in the first quarter, but far more important is what lies ahead.

"The group seem to be making steady process re-engineering their cost structure and the currency headwinds they face have eased a little.

"Burberry’s retail sales put in an impressive 3 per cent comparable sales increase, a good performance for any fashion retailer these days. Burberry are working hard to keep ranges fresh and customers engaged and will begin to start offering pieces from new Creative Director Riccardo Tisci’s first range in September."

Mr Clayton said that Burberry has a new creative impetus, a commitment to pushing the exclusivity of the brand ever higher and a focus on driving down costs whilst pushing sales effectiveness higher.

"We think the potential for Burberry is strong and that the group’s strategy is correct, which is why it’s one of our largest holdings in the fund," he added.

It emerged last month that Burberry's former chief creative officer, Halifax-born Christopher Bailey, is to walk away from the fashion chain with a bumper pay-off of around £13m.