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Burberry blames sales slowdown on 'aspirational shoppers' Burberry still counts on big spenders but 'aspirational' shoppers stay away
(about 7 hours later)
Luxury fashion brand Burberry has blamed slowing sales on the spending squeeze faced by middle-class designer label lovers who can no longer afford to satisfy their lust for £1,000 handbags and wear £500 dresses. Luxury fashion brand Burberry has blamed slowing sales on the spending squeeze faced by middle-class designer label lovers who can no longer afford to satisfy their lust for £1,000 handbags or £500 dresses.
Finance director Stacey Cartwright said that while its wealthiest customers were spending more than ever, so-called "aspirational" shoppers – a term used to describe consumers who spend a large chunk of their disposable income on designer labels but cannot stretch to the most expensive items – were staying away from the shops.Finance director Stacey Cartwright said that while its wealthiest customers were spending more than ever, so-called "aspirational" shoppers – a term used to describe consumers who spend a large chunk of their disposable income on designer labels but cannot stretch to the most expensive items – were staying away from the shops.
"The reason traffic (in stores) is down is because aspirational luxury shoppers are more impacted by the macro economic environment," she said. "Higher spending luxury consumers are more resilient and have carried on spending." "The reason traffic [in stores] is down is because aspirational luxury shoppers are more impacted by the macro economic environment," she said. "Higher spending luxury consumers are more resilient and have carried on spending."
She also complained that the Olympics had hurt sales in London . She also complained that the Olympics had hurt sales in London.
Analysts said the divide between wealthy and middle-class customers was reflected in the fortunes of Burberry's various brands. Its most expensive ranges, such as "Prorsum", which it shows on the catwalk, and "London", were doing well while sales of cheaper casualwear line "Brit" slumped.Analysts said the divide between wealthy and middle-class customers was reflected in the fortunes of Burberry's various brands. Its most expensive ranges, such as "Prorsum", which it shows on the catwalk, and "London", were doing well while sales of cheaper casualwear line "Brit" slumped.
Last month the 156-year old British company, famous for its raincoats lined with a distinctive camel, red and black check pattern, spooked investors with a profit warning that knocked £1bn off its stock market value. At that time it said growth had stalled in July and August, particularly in China, which has been the driving force of a near three-year boom in demand for luxury goods, sparking fears that the luxury sector could face a fresh downturn. Last month the 156-year-old British company, famous for its raincoats lined with a distinctive camel, red and black check pattern, spooked investors with a profit warning that knocked £1bn off its stock market value. At that time it said growth had stalled in July and August, particularly in China, which has been the driving force of a near three-year boom in demand for luxury goods, sparking fears that the luxury sector could face a fresh downturn.
Yesterday, Burberry was able to soothe nerves after demand picked up during September, enabling it to eke out underlying retail sales growth of 1% for the second quarter as a whole – albeit a marked slowdown on the 6% seen recorded in the previous quarter. It also said that profit margins at its retail and wholesale divisions would be the same as last year for the first six months of the year, rather than lower as it had previously warned. The signs of improvement sent the shares rocketing to the top of the FTSE 100 risers list, closing up more than 13% at £11.36. On Thursday, Burberry was able to soothe nerves after demand picked up during September, enabling it to eke out underlying retail sales growth of 1% for the second quarter as a whole – albeit a marked slowdown on the 6% seen in the previous quarter. It also said that profit margins at its retail and wholesale divisions would be the same as last year for the first six months of the year, rather than lower as it had previously warned. The signs of improvement sent the shares rocketing to the top of the FTSE 100 risers' list, closing up more than 13% at £11.36.
"While there is still uncertainty over the impact the global economic slowdown will have on luxury spending, we are reassured that demand has not fallen off a cliff and so believe the shares have been oversold," said Seymour Pierce analyst Kate Calvert."While there is still uncertainty over the impact the global economic slowdown will have on luxury spending, we are reassured that demand has not fallen off a cliff and so believe the shares have been oversold," said Seymour Pierce analyst Kate Calvert.
The Olympics also proved to be a major headache for the British brand as the tourists who ventured to London during the summer came to watch sport rather than shop. "London was a lot quieter than usual when it came to shopping," continued Cartwright. "We have a much greater exposure to London than many of our peers because it is our home market." The Olympics also proved to be a major headache for the British brand as the tourists who ventured to London during the summer came to watch sport rather than shop. "London was a lot quieter than usual when it came to shopping," said Cartwright. "We have a much greater exposure to London than many of our peers because it is our home market."
The number of foreign visitors to the UK actually fell 5% to 3m in August compared with a year ago according to official figures while airports operator BAA said 9.5m passengers passed through its airports in August, down 2% on 2011. Asian tourists, predominantly from China, are among Burberry's biggest customers in major tourist cities such as London and some analysts think they may have either delayed travel plans, fearing transport chaos, or cancelled them altogether as confidence in their powerhouse economy falters.The number of foreign visitors to the UK actually fell 5% to 3m in August compared with a year ago according to official figures while airports operator BAA said 9.5m passengers passed through its airports in August, down 2% on 2011. Asian tourists, predominantly from China, are among Burberry's biggest customers in major tourist cities such as London and some analysts think they may have either delayed travel plans, fearing transport chaos, or cancelled them altogether as confidence in their powerhouse economy falters.
In the wake of the profit alert analysts have questioned the sales outlook faced by luxury goods companies although the picture was confused by upbeat figures from Italian fashion brand Prada which said it had not experienced a slowdown.In the wake of the profit alert analysts have questioned the sales outlook faced by luxury goods companies although the picture was confused by upbeat figures from Italian fashion brand Prada which said it had not experienced a slowdown.
China is the big prize for the luxury goods industry with the country expected to become the biggest single market by 2015 but, along with the UK, it is currently Burberry's weakest market. Cartwright said sales had been affected by a decline in gift-giving ahead of next month's leadership change. She denied there was a problem with the Burberry brand, arguing its experience reflected the global economic backdrop and would be echoed in the results of peers such as Louis Vuitton owner LVMH and PPR, which owns Gucci, which will update investors in the coming weeks. China is the big prize for the luxury goods industry with the country expected to become the biggest single market by 2015 but, along with the UK, it is currently Burberry's weakest market.
Cartwright said sales had been affected by a decline in gift-giving ahead of next month's leadership change. She denied there was a problem with the Burberry brand, arguing its experience reflected the global economic backdrop and would be echoed in the results of peers such as Louis Vuitton owner LVMH and PPR, which owns Gucci, which will update investors in the coming weeks.