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Burberry and ASOS expecting sales boost from tumbling pound

Published 16/10/2016

Burberry is expected to have benefited from a better summer for luxury sales
Burberry is expected to have benefited from a better summer for luxury sales

Retailers Burberry and ASOS will report from opposite ends of the fashion spectrum this week, but both are expected to benefit from the Brexit-hit pound.

Luxury fashion firm Burberry is set to reveal a return to like-for-like sales growth when it updates on trading after a tough first half.

The embattled group is expected to have benefited from a better summer for luxury sales, with analysts expecting Tuesday's update to show a turnaround since a painful first quarter, when like-for-like sales fell 3%.

Retail experts forecast a 1% rise in like-for-like sales in the second quarter to the end of September, although last month's unexpected heatwave has caused chaos for UK clothing retailers.

It has been an eventful first half for the firm, which announced in July that Christopher Bailey will be sidelined as chief executive and replaced by Marco Gobbetti, currently at French firm Celine.

Mr Gobbetti joins next summer and Mr Bailey will move to the role of president and retain his title of chief creative officer.

The changeover at the top comes as the group looks to stop falling profits and slowing sales.

In May, the group said it would slash £100 million in costs to help offset difficult trading after reporting a 10% fall in full-year profits.

But analysts believe Burberry is on the right tracks with its turnaround and has been widely praised for its recent move to launch a "see now, buy now" fashion show.

Analysts at RBC Capital Markets said: "Burberry is at the forefront of the sector when adapting to changes in the millennial luxury consumer, who display greater appetite for newness and require faster response from luxury brands.

"Combining men/women runway events with seasonless collections available to buy immediately after the shows is Burberry's attempt to close the gap between runway and retail in a new digital era."

The tumbling pound is also providing a welcome boost for Burberry, which makes most of its sales overseas.

As of July, Burberry said it was in line for a £90 million profit fillip from the pound, but the further falls in sterling since then could see the group revise this higher once more.

Online fashion firm ASOS is expected to report a jump in international sales on the back of the plunging pound when it reveals its annual results on Tuesday.

Analysts at Shore Capital said the firm will unveil a sales boost in America and Europe thanks to sterling's collapse following Britain's vote to leave the European Union.

The broker's analyst George Mensah said ASOS was buoyed by an 8% currency tailwind, helping it "finish the financial year with a flourish", with 28.9% sales growth in the two months to August 31 2016.

The firm said in July that sales growth had already been ramping up across its overseas sites, which now account for more than half of group turnover.

"On a reported basis we expect to see an acceleration in sales in the US and EU, with currency tailwinds supporting top-line momentum," Mr Mensah said.

"We view the online fast fashion market in the US as underdeveloped compared with the domestic UK market, thus representing an opportunity for those businesses with a compelling proposition such as ASOS and Boohoo."

The currency move will help the firm outstrip previous expectations of 20-25% annual sales growth, with revenues coming in 25.5% higher, Shore Capital said.

ASOS, which stands for As Seen On Screen, posted a pick-up in sales growth for the four months to June 30 - up 28% in the UK at £203.1 million and 25% to £297.4 million across its burgeoning international arm with currency movements stripped out.

The rise of the fast fashion firm flies in the face of retail stalwart Marks & Spencer, which is struggling to revive flagging sales in its under-pressure clothing arm.

The latest official figures for the retail sector showed shoppers largely shrugged off the Brexit vote as sales suffered only a slight dip in August after a bumper July.

The Office for National Statistics showed r etail sales volumes dipped 0.2% on July, which had seen a jump of 1.9% in the strongest performance for the month in 14 years.

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