Leeds factory in doubt as Burberry allows building lease to lapse
The future of a new Burberry factory in Leeds has been cast into further doubt after the fashion retailer allowed the lease on a building set to be used for the site to lapse.
Burberry had planned to set up a £50 million trench coat plant at the Grade I-listed Temple Works, which would have created 200 jobs, but put the plans on ice following the Brexit vote.
On Wednesday, it emerged that the group has allowed the lease on the building to lapse after deciding it would be too expensive to renovate.
While Burberry still has land in Leeds, it would have to build a factory from scratch and the firm is understood to be assessing whether to press ahead with the idea or scrap it.
The company's finance chief Julie Brown said: "We have decided not to push ahead with the Temple Works building. We have let the option lapse."
The news came as new Burberry chief executive Marco Gobbetti unveiled rising first quarter sales, driven by strong performances in China and in the UK.
The company reported a 3% increase in retail sales to £478 million in the three months to June 30, while like-for-like sales rose 4% in the first set of results under Mr Gobbetti.
Revenue was helped by the UK, where the weaker pound lifted sales, although Burberry said it saw a "deceleration" of this trend towards the end of the quarter.
Mr Gobbetti said: "I am delighted to have started as Burberry CEO. We are pleased with our performance in the first quarter, while mindful of the work still to do.
"This is a time of great change for Burberry and the wider luxury industry.
"I look forward to building on the foundations Christopher (Bailey) and the team have put in place and creating new energy to drive growth."
Mr Bailey stepped down as chief executive earlier this month, becoming president and chief creative officer as part of an overhaul.
The company has announced plans to deliver at least £100 million in cost savings by 2019 as part of a turnaround plan to be carried out by Mr Gobbetti, and Burberry added that it is on track to deliver £50 million in savings in 2018.
Steve Clayton, fund manager at Hargreaves Lansdown, said: "The Chinese are spending again. Retail sales on the mainland were up in the mid-teens and Hong Kong continues to improve after a tough patch.
"This is an encouraging performance from Burberry, which looks to be at long last pulling out of the doldrums."
On Thursday, Mr Gobbetti will face shareholders at the group's AGM amid a fallout over Burberry's executive pay plan that will see Mr Bailey pocket a £5.4 million share award.
Royal London Asset Management earlier this week added its voice to investor advisory groups Pirc, Institutional Shareholder Services and the Investment Association in criticising the firm's remuneration policy.
Royal London said it will vote against the firm's pay report and against the re-election of remuneration committee chairwoman Fabiola Arredondo.
A Burberry spokesman said: "There is no change to our commitment to manufacturing in Yorkshire.
"As we have said before, we are continuing to think through our plans for the manufacturing and weaving facility in Leeds.
"We remain committed to the city and the region as indicated by our recent announcement to open a shared services office in the centre of the city in October".