Burberry shares drop despite reports designer could be in for £125m windfall from sterling decline
British designer brand Burberry said today that the fall in sterling could help boost its profit for the year by up to £125m – but its share price dropped 6.9 per cent at the open.
Sterling has dropped significantly since the UK voted for Brexit in June – and in recent weeks, the pound has plumbed new depths.
The luxury goods group said that, based on 30 September exchange rates, the adjusted retail/wholesale profit for 2017 would benefit by about £105m compared with 2016 – and "given the significant movement in exchange rates since 30 September, the benefit using 12 October rates would be at least £20m higher than the £105m".
The company revealed the potential foreign exchange benefit as it delivered a trading update for the first half of 2016. For the six months to September, Burberry's revenue fell four per cent to £1.16bn. Retail revenue was up two per cent, to £859m.
"In a challenging external environment, we continue to focus on product innovation, retail productivity and digital leadership, against a backdrop of sustained action and investment to deliver long-term out-performance of our brand and business," said Burberry chief creative and chief executive officer Christopher Bailey.
"The progress we are making to improve our ways of working, the agility of our teams to react to changes in consumer behaviour and the strength of our brand give us confidence for the future. We remain on track to deliver our financial goals."
Swiss bank UBS first predicted that Burberry stood to make big gains from the drop in sterling back in July, when it said the "weak pound more than offsets weak sector trading".
