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Burberry today said that sales in its London stores remain “on fire” but profits at the British fashion house fell by a fifth as department stores slashed their orders.
“London is still on fire thanks to the influx of tourists,” said finance director Stacey Cartwright. “Thanks in part to London Fashion Week, and all the momentum around the brand, we find we are reaching new customers from the UK too.”
Profits before tax dropped 19.6% to £78 million in the six months to the end of September as sales at its wholesale arm tumbled 23%. Big department stores, particularly in the US, have cut their orders in response to recession. But Cartwright said that they are now starting to make re-orders after selling out of some of Burberry's products.
The trench coats to handbags-maker also took a £4.2 million hit from its restructuring programme. Cost-cutting plans have seen Burberry, under chief executive Angela Ahrendts, shed more than 1000 jobs but are expected to save the company £50 million this year.
A strong performance from its standalone stores — which account for 54% of sales — helped the label to raise revenues by 6% in the period to £572 million. Like-for-like sales rose 5% in the last quarter. Cartwright said that Burberry's accessories have been flying off the shelves, especially its handbags and snoods, a scarf-hood hybrid.
She added that shoppers are buying “quality” goods rather than throw-away items in the recession: “People are buying investment pieces, which is helping Prorsum [Burberry's top-end collection]”.
The company predicts that it will be more profitable in the second half of the year, as lower stock levels reduced the need for discounting.
Burberry has raised its half-year dividend by 4% to 3.5p. Its shares fell 7p to 594½p.
