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Hong Kong weighs on Burberry

Luxury retailer Burberry says falling sales of high margin products in Hong Kong dented its latest quarterly earnings.

While the group’s underlying revenue rose 15 per cent, and comparable sales rose by eight per cent, a robust performance in China and Korea was undermined by falling sales in Hong Kong.

That fall was largely due to the impact of the Occupy Central democracy protests and slowing tourism numbers from China’s mainland, combined with the clampdown on gift-giving.

Burberry opened a new store  in Tokyo’s Omotesando district and two additional concessions in Japan, ahead of the current licensee expiry later this year. And it opened its first dedicated beauty store opened in Asia, in Seoul, South Korea.

CEO and chief creative director Christopher Bailey described the overall performance as “strong”. “Fifteen per cent underlying growth in retail sales reflects this commitment to every element of the customer experience, from product, to marketing, to service.”

He said Asia Pacific delivered low single-digit percentage growth, primarily reflecting the disruption in Hong Kong, a high margin market where comparable sales fell slightly in the period. Mainland China and Korea grew by a mid to high single-digit percentage.

And digital again outperformed in all regions.

“Looking ahead, we will bring equal focus to maximising the opportunities of the final quarter – including Lunar New Year – while being mindful of what remains a challenging external environment.”

Total revenue for the company for the quarter to December 31 was £604 million. Same store sales were up eight per cent.

“By product, the relaunch of heritage rainwear and cashmere scarves drove strong growth, reflecting the intensified focus in these core categories, across design, marketing, merchandising and in-store execution. In fashion, runway-inspired ponchos saw exceptional performance,” Bailey said.

In the six months to March 31 2015, Burberry expects wholesale sales to be down, partly due to a more cautious approach from wholesale customers selling to European consumers and into Asian travel retail markets.

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