Burberry Beats Estimates as Bailey Battles Luxury Slowdown

  • Sales growth improves in third quarter versus second
  • Trenchcoat maker won’t benefit from currency fluctuations

U.K. luxury-goods maker Burberry Group Plc reported estimate-beating first-half profit as Chief Executive Officer Christopher Bailey showed he can be as adept at trimming expenses as he is at designing patterns.

Adjusted pretax profit in the six months through September rose 3 percent to 152.9 million pounds ($233 million), London-based Burberry said Thursday. Analysts predicted 144.2 million pounds, according to the median estimate compiled by Bloomberg.

Bailey, who is also chief creative officer, is cutting bonuses and consolidating products under one label as he grapples with slowing luxury demand in China. Comparable sales have improved in the third quarter compared with the second, and Burberry isn’t changing its outlook for mid single-digit percentage growth in comparable sales in the second half, the company said.

The improving revenue “should be viewed positively by the market and is broadly consistent with other luxury peers,” said Rogerio Fujimori, an analyst at RBC Capital Markets.

Burberry shares rose 0.5 percent to 1,342 pence at 8:04 a.m. in London. Before today, they had fallen 18 percent this year, compared with a 4.1 percent decline for Britain’s benchmark FTSE 100 Index.

The trenchcoat maker said it won’t benefit from currency fluctuations this year if exchange rates stay at current levels, cancelling last month’s forecast for a 10 million-pound uplift to retail and wholesale profit. “The external environment remains challenging and uncertain,” Burberry said.

More Chinese people are shopping in Japan rather than Hong Kong to take advantage of a weak yen and anti-extravagance measures at home, yet the maker of 1,995-pound trenchcoats only has six stores there.

Phasing out the Prorsum, London and Brit labels by the end of 2016 will make it simpler for customers and more efficient for the business, Bailey said last week as he unveiled the company’s holiday advertising campaign. Unifying the runway, formal wear and casual lines under the Burberry brand won’t affect pricing or the product range, according to the company.

The global market for personal luxury goods is heading for its most sluggish year since 2009 as a combination of stock market turmoil, a strong dollar and a commodity-price rout curb demand, according to Bain & Co.

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