Britain's Burberry reported a 3 percent drop in like-for-like sales in a "challenging" first quarter, underlining the size of the task facing Marco Gobbetti when he takes over chief executive duties from Christopher Bailey next year. The luxury goods group said a positive 3 percent contribution from new stores resulted in flat retail sales of 423 million pounds ($562 million), slightly better than analysts' expectations.
Burberry announced the appointment of Gobbetti, the Italian boss of LVMH brand Celine, on Monday. Bailey will become president as well as retaining his creative role.
The firm is struggling to counter a sales downturn in mainland China and Hong Kong and fewer tourists in Europe after attacks in Paris and Brussels. However, it is benefiting from a drop in the value of the pound after Britain voted to leave the European Union last month. The group known for its camel, red and black check design, said on Wednesday it expects a post-Brexit drop in the pound to boost its earnings this year. The brand incurs about 40 percent of its costs in Britain, but makes only 10 percent of its sales in its home market and more than half of those come from foreign tourists in London, analysts estimate.
It said its adjusted profit for the year would be boosted by about 90 million pounds ($120 million) if exchange rates remain at current levels, compared with a previous forecast of 50 million pounds.
The pound has fallen to 31-year lows since Britons' voted on June 23 to leave the European Union.
Burberry's sales in Britain picked up in its first quarter, through June 30, but Chief Financial Officer Carol Fairweather said it was too early to assess any impact of the Brexit vote on demand.
"In the UK, our home market, we did see a strong performance increasing throughout the quarter, so it's far too early to call about what it may mean in terms of UK trading," Fairweather told reporters on a conference call. "Short term, there's probably no discernable impact on our operations globally. (But) we are calling out today that we do benefit from the movement in foreign exchange rates on our reported profit."