July 11, 2018 / 6:21 AM / 2 years ago

Burberry gears up for major new collection

LONDON (Reuters) - British luxury brand Burberry (BRBY.L) reported quarterly sales growth of 3 percent on Wednesday ahead of the first collection in September from the group’s new designer, which should help energize its turnaround.

FILE PHOTO: The logo of British luxury brand Burberry is seen at a shop at the Bahnhofstrasse in Zurich, Switzerland July 12, 2017. REUTERS/Arnd Wiegmann/File Photo

Burberry’s chief executive Marco Gobbetti is part way through repositioning the label to be more upmarket and is pinning his hopes on Riccardo Tisci, the former Givenchy star who has designed costumes for Beyonce and Madonna, to help transform the quintessentially British fashion house.

Gobbetti wants Burberry to catch up with faster-growing luxury goods rivals like Louis Vuitton (LVMH.PA) and Gucci (PRTP.PA), but he has warned there will be little growth in revenue and operating profit while the plan is implemented.

Shares in Burberry traded down 3.5 percent to 20.27 sterling at 0923 GMT after the quarterly sales result met expectations. The stock has climbed 17 percent since the beginning of the year, outperforming a flat FTSE 100 index .FTSE.

“In early trade, the bears seem to be in charge, with the stock slipping around 4 percent as profit-taking sets in following Burberry’s strong run in recent weeks,” said Steve Clayton from Hargreaves Lansdown, whose fund owns Burberry shares.

Analysts at RBC who rate Burberry “underperform” highlighted the risks around the group’s new direction.

“We remain cautious on the stock given the potential disruption with the change in creative direction next year and the cost/time/risks to reposition a big brand like Burberry into luxury fashion,” RBC’s Rogerio Fujimori said in a note.

Burberry said on Wednesday there was no change to its earnings guidance at constant exchange rates after its underlying performance in the 13 weeks to June 30.

Its sales were driven by a strong performance in the Americas, and continued demand from Chinese buyers for its heritage trench coats, rainwear, handbags and other products, but demand from Chinese tourists has shifted to Asia and away from the UK and Europe due to the exchange rates.

“We do find our Chinese clientele will move depending on currency and how currency is moving and basically we had far fewer Chinese tourists in Europe, in the UK and continental Europe this quarter, they were shopping more in Asia,” Chief Financial Officer Julie Brown told reporters on a call.

Burberry is holding is annual general meeting on Thursday.

(GRAPHIC: Share performance of luxury companies - reut.rs/2LbcXUg)

Reporting by Sarah Young, editing by James Davey and Elaine Hardcastle

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