Burberry fell well short of forecasted sales growth in its half-year results, here’s what the analysts had to say about the results.

“Asia Pacific has been the biggest problem for Burberry, with the region declining by mid-single digits during the period, compounded by further year-on-year declines in Hong Kong during the second quarter. Weakening consumer sentiment, especially since the crash of the Chinese market during the summer, has transformed a once booming region into Burberry’s chief area of concern.

“Closer to home, the picture is more promising. EMEIA comparable sales rose into double digits, fuelled mostly by the travelling luxury consumer during the first quarter and an especially strong appetite for the brand in Italy, Spain and France.

“Elsewhere, directly owned businesses in Canada, Brazil and Mexico delivered double-digit comparable growth too. Conversely, the US slowed in the second quarter, with damp demand from the domestic and tourist consumer alike.

“What this demonstrates is a mixed response to a brand, which, just two years ago, appeared to be warmly welcomed the world over.

“While Burberry is certainly best known for its iconic trench coats with trademark chequered lining, the brand has an extremely mixed proposition and we do wonder whether this represents an over-reliance on core categories that may not have universal appeal, especially at luxury price points.” Anusha Couttigane, Conlumino


“Given that Hong Kong comprises a 10th of the company’s sales, a fall was to be expected. The extent of the fall, however, was an unpleasant surprise for investors.” Connor Campbell, Spreadex


“The worry beforehand was that group performance would be hit by the slowdown in China and the comment that ‘For full-year 2016, we expect that adjusted pre-tax profit will be broadly in line with the average of those analysts who have recently downgraded forecasts’ is ominous, with the news that first half retail sales were only up by 2% underlying, ‘in an increasingly challenging environment for luxury customers’, implying that second quarter sales were down.” Nick Bubb, independent analyst 


“On our calculations, around £50m of costs may need to be mitigated to preserve current consensus forecasts given the weak second quarter and outlook. We believe this is broken down into £20m to £30m performance-related pay savings and £20m of cost initiatives.

“Burberry’s balance sheet remains strong, offering an attractive valuation despite short-term headwinds. However, headwinds remain as the group is not benefitting to the extent of peers from Chinese travel trends to Europe and Japan. Strong operational performance and cost discipline will be needed to meet current expectations.” Christophe Walker, Nomura International


 “Weakness in Asia Pacific was driven by softening consumer sentiment, with further deceleration in Hong Kong, Macau, and mainland China, whilst EMEIA delivered double-digit like-for-likes. Americas saw uneven consumption trends in the period, particularly across domestic and tourist consumers, likely due to stock market volatility and the strength of the dollar respectively.

“Burberry has maintained its full-year guidance expectations, and believes it can meet consensus pre-tax profit estimates of £445m through ongoing cost efficiencies, a reduction in performance-related pay and a £10m foreign exchange tailwind to reported profit. In retail, the group expects second half like-for-likes to return to mid-single digit, with FY16 low single digit net new space contribution. Wholesale revenues are expected to remain broadly unchanged for FY16”. Rogerio Fujimori, RBC Capital Markets