Burberry Group plc (LON:BRBY) reported a dip in second half revenue as a decline in licensing and wholesale sales offset growth in retail.
Shares fell 4.76% to 1,620p in morning trading.
Total revenue came to £1.7bn in the six months to 31 March, down 1% on an underlying basis, as the trench coat maker took action to strengthen its brand positioning in the US and in its beauty business.
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Retail revenue, which represents 80% of total revenue, gained 3% to £1.3bn. The increase was driven by growth in the UK and an improvement in Continental Europe. Mainland China delivered “high single-digit” percentage growth but sales in Hong Kong and Korea fell.
Retail sales in the Americas declined due to a “challenging environment”. A stronger dollar encouraged US customers to spend more abroad but demand fell at home.
Wholesale and licensing revenue under pressure...
In wholesale, revenue dropped 13% to £327mln, reflecting a slump in beauty, which Burberry said was due to the rationalisation of distribution in key markets and distributor de-stocking.
Licensing revenue tanked 28% to £12mln due to the planned expiry of Japanese licenses as the group moved to a direct retail operation.
“In an uncertain environment, we continue to take action to strengthen the brand and reposition Burberry for growth,” said chief executive Christopher Bailey.
“While we have more to do, as we build on our progress so far, we remain confident about Burberry’s prospects in the longer term.”
The luxury fashion company said its outlook for fiscal year 2017 pre-tax profit remains unchanged. It expects a £130mln benefit from foreign exchange movements on profit, based on rates at 31 March.
Burberry added that in a "rapidly changing environment" it would maintain tight cost control and continue to execute its strategy, including the transition of its Beauty business to a licence agreement.
Stronger pound could hurt results...
Liberum reiterated a 'sell' rating and target price of 1,350p, saying that the benefit of a weaker pound on reported results could dissipate. The broker noted that news yesterday of a snap general election on 8 June has seen a strong rally in the pound.
"Should this continue towards polling day Burberry's own, foreign exchange-driven rally could disintegrate," Liberum said.
Liberum also said there was a slight slowdown in fourth quarter retail like-for-like sales compared to the previous quarter to 2% from 3%, which "may give the market pause for thought".
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-- Adds share price reaction, broker comment --