LONDON (Alliance News) - British luxury fashion retailer Burberry Group PLC Thursday posted a good increase in retail revenue in the first quarter of its financial year, but said the strength of the sterling continues to take a chunk out of its profits.
The demand for Burberry's goods has been driven by much of the same factors of late: travelling "luxury customers", particularly from Asia, buying the retailer's outerwear and large leather goods, such as its iconic trench coats and check-print patterned goods.
This trend continued into the first quarter, with retail sales increasing to GBP370 million in the three months to June 30, up from GBP339 million in the same period the prior year. On an underlying basis, sales grew 17%, but on a reported basis only 9%, hit by the strength of the sterling. Comparable sales growth in the period was 12%.
"If exchange rates remain at current levels, the full impact on reported retail/wholesale profit in financial year 2015 will be material," Burberry said in its statement.
The company said that based on current rates, foreign exchange would wipe around GBP55 million off its retail and wholesale profit for the current financial year. It said it would also wipe around GBP10 million of licensing revenue.
In May, Burberry said it will pick-up the pace of investment in the current financial year, pumping in around GBP200 million in capital expenditure, focusing on its retail division, new stores, the Japanese market, and its beauty division, which the company brought back in-house last year.
Burberry has also been strengthening its online business, and increasing conversion both online and offline, transforming the company into a "digital luxury brand".
"With great brand momentum and a focused vision, we remain confident of delivering sustainable, profitable growth into the future," said new Chief Executive Officer Christopher Bailey in a statement Thursday.
Burberry said it still expects net new retail space to contribute low to mid single-digit percentage growth to retail revenue in the financial year 2015.