Burberry warns on profits for 2017 amid challenging demand

Burberry warned profits for 2017 are likely to be around the bottom of the range of analysts' forecasts due to increased investment in the business and a "challenging demand environment".

Sales at the fashion house decreased by 1% in the second half of the year due to continued weak footfall in Hong Kong and Macau and declines in North America's travelling luxury customers.

Full-year adjusted profit before tax for 2016 were said to be "broadly in line" with analyst estimates.

In retail, like-for-like sales were down 2% in the six months to 31 March, or up 1% if Hong Kong and Macau are excluded.

Asia Pacific endured a "mid single-digit percentage" decline in LFL sales that remained consistent across the third and fourth quarters, with Hong Kong LFL sales declining by more than 20% for the third successive quarter.

Mainland China and Korea continued to show positive growth, as did Japan, where total retail revenue for the full year more than doubled.

The Europe, Middle East, India and Africa region was broadly unchanged, though Europe slowed and the UK and Middle East remained "difficult" throughout the half.

LFL sales in America also slowed in the second half, with demand "uneven" and spending by the travelling luxury customer down by a double-digit percentage.

Wholesale revenue was down 1% in the second half, though beauty wholesale revenue rose 11% driven by the sell-in of the new Mr Burberry fragrance.

Christopher Bailey, chief creative and executive officer, said: "In an external environment that remains challenging for luxury, we continue to focus on reducing discretionary costs and are making good progress with developing enhanced future productivity and efficiency plans.

"Meanwhile, brand momentum is strong, digital continued to outperform in the half and innovation in new products is resonating well with our customers."