Belfast Telegraph

Rallying pound may hit Burberry's revival

By Holly Williams

Luxury fashion house Burberry has seen shares come under pressure amid fears the pound's snap election rally will bring its sales rebound to a halt.

Shares in the FTSE 100-listed group tumbled as much as 8% at one stage after it revealed slowing sales growth and as retail experts warned its recent bounce-back could "disintegrate" if the pound continues to surge towards the June polling day.

Sterling has jumped to its highest level since the start of October in the wake of Prime Minister Theresa May's surprise announcement on Tuesday to hold a general election in June.

Analysts said this could put paid to Burberry's sales turnaround, which has been largely driven by the pound's plunge since last June's Brexit vote.

Tom Gadsby, an analyst at Liberum, said: "News of a snap UK election has seen a strong rally in the pound. Should this continue towards polling day, Burberry's own, foreign exchange-driven rally could disintegrate."

He added that the slowdown in same-store sales growth, to a lower-than-expected 2% in Burberry's final quarter from 3% the previous three months, would also give the market "pause for thought".

Burberry's trading update revealed that tough conditions in the US offset ongoing "exceptional" trading in its UK home market.

The group, famous for its trench coats and check scarves, has been boosted as shoppers from the US and Asia have flocked to Britain to take advantage of the plunging pound to snap up luxury goods at a knock-down price.

Total retail revenues over Burberry's second half jumped 19% to £1.3bn thanks to the weakness of sterling.

The group added that the pound's plunge was set to flatter underlying full-year retail and wholesale profit by around £130m, up from the £120m pencilled in earlier this year. But this was before the latest sterling rally.

Burberry also confirmed it was continuing to keep its £50m plans for a flagship manufacturing and weaving facility in Leeds on hold. Chief finance officer Julie Brown said the group was still committed to Yorkshire, but was "taking a moment to think through" its plans for a new facility in Leeds South Bank.

It first revealed it was pausing plans for the site last July in the wake of Brexit uncertainty.

Belfast Telegraph