Analysts Not Overly Concerned By Burberry Profits Warning

Burberry Is Still Strong Despite Expected Profits Dip, Claim Analysts

The slowdown in Chinese consumers buying British fashion has led to Burberry warning investors its profits may be lower than expected.

Burberry, one of London's best performing upmarket fashion retailers, told the market on 11 September it would post lower than expected profits, causing its share price to drop drastically.

But analysts remain positive about the future of the luxury brand, with other high-end fashion houses suffering similar sales wobbles.

Jaana Jatyri, chief executive of fashion forecasting company, Trendstop.com, told Huff Post UK: "By no means will Burberry implode, as it has an in-built hedge in its high-net-worth customer base - and a chief with an acute understanding of the market - but these figures show that even it is not immune to market conditions.

"A percentage of the aspirational buyers that have driven Burberry upwards are starting to run out of steam. In recent years, Burberry has thrived in the emerging markets, where people crave democratic luxury, but even the emerging markets are slowing.

"This is not the beginning of the end for Burberry, it's just a shot across the bows."

Paul French, chief China strategist at Mintel, told the Huffington Post UK Louis Vuitton was also hurting from losing popularity in China, as fickle consumers choose Italian brands such as Gucci and Prada instead.

"It is worth remembering the global clout of the Chinese shopper is massive now, so if they turn away from Burberry that will mean less sales in places where they travel to spend and avoid high domestic taxes at home, such as London, Paris, Hong Kong, Singapore, Melbourne, and Tokyo," he explained.

"China's luxury goods market is competitive, highly competitive and a crowded space. Sadly fashion is rather unpredictable - Burberry got it wrong for the Chinese market this year and now they're blaming the consumer - a sort of fashionista's version on the politician's old adage of 'let's dissolve the people and elect a new one that likes what we're saying'."

Tarlok Teji, retail analyst at Manchester Business School, agreed, telling Huff Post UK the warning simply proved Burberry wasn't immune to the global slowdown.

"Given Burberry performed so well last year, flat performance against strong comparative numbers could be seen as being good news," he said.

“The figures also reflect the slowdown in China. This is part and parcel of the global downturn, but should be short and shallow. Typically the luxury end of the market is more resilient than other sectors, and as Burberry has good management and a resilient strategy, it is still likely to be a retail winner in these tough and turbulent times.”

However, Burberry's woes could be indicative of a wider slow down in the luxury brands market.

"Burberry's weak performance - at least, weak in the context of the recent past - concerning for the wider luxury goods market, as the brand looks to have made all the right moves from investing in its own retail outlets to cultivating growth in the key Asia-Pacific region, where it recorded 43% revenue growth in the year to March 2012," said John Mercer, senior retail analyst at Mintel.

"Beyond the short term, Burberry will remain one of the stronger performers in the luxury sector, but until we get further indications from other luxury houses we do not know for sure whether this is simply a short-term blip or a turning point for the overall luxury goods market."

Investec Securities analyst Bethany Hocking agreed, saying while she advised investors to hold on to Burberry shares, the shares, and wider luxury sector, would suffer in the short term.

"We, and the market, will have to wait for more information on 11 October, " she added.

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