Burberry profits dive by a quarter despite boost from weak pound

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Burberry saw half-year profits slump 24 per cent as the benefits of a weaker pound after Brexit were offset by pain in its wholesale and licensing business.

The company reported underlying pre-tax profit of £146m in the six months to 30 September, down from £151.7m over the same period last year.

Revenue at constant currencies dropped 4 per cent to £1.16bn. However, when accounting for currency fluctuations, revenue rose 5 per cent.

The luxury fashion firm said retail growth was led by strength in the company's UK division, where like-for-like sales spiked 30 per cent as tourists flocked to London to take advantage of the drop in sterling in the second quarter.

But that growth was “offset by declines in wholesale and licensing, in part reflecting actions to build and reinforce luxury brand positioning”, Burberry said.

The company explained that wholesale licensing income was hit by the planned expiry of a raft of licences in Japan, which accounts for more than half of that division's revenue.

Overall licensing profit dropped 53 per cent to £11m.

Global sales took a hit, with Asian and American like-for-like retail sales dropping by a “low single-digit percentage” while growth in Europe saw low single-digit sales growth in in the first half, aided by UK tourist spending.

The company closed 24 stores and concessions globally in the first half of the year, partially offset by 11 openings.

It comes as the company embarks on a strategic turnaround plan that has included simplifying their product line, revamping its digital store and cutting costs by as much as £20m over 2017.

Chief executive Christopher Bailey said: “In May we outlined plans to evolve how we work as a business and to drive Burberry's future growth in a rapidly-changing luxury environment.

“Since then, we have made good early progress towards realising the significant opportunities ahead of us as we begin implementing our five strategies. We remain on track to deliver our financial goals.”

PA