Burberry in big trouble

[LookSharp]

http://www.guardian.co.uk/business/feedarticle/8288601

* Q3 underlying revenue up 9 percent to 329 million sterling
* To cut about 290 jobs in Britain, 250 in Spain
* To make around 50 million sterling of cost savings in 2009-10
* Profit guidance for 2008-09 unchanged
(Adds detail)
By Mark Potter
LONDON, Jan 20 (Reuters) - British luxury goods group Burberry beat third-quarter revenue forecasts, helped by heavy discounting, and said it would cut around 540 jobs in Britain and Spain to protect profit in tough trading conditions.
The 153-year-old maker of upmarket raincoats and handbags said on Tuesday revenues rose 9 percent at constant exchange rates to 329 million pounds ($477 million) in the three months to Dec. 31.
This compared with first-half growth of 13 percent and forecasts of 270 million to 298 million pounds, according to a Reuters poll of nine analysts.
Burberry said full-year adjusted profit would be in line with guidance it gave in November and that around 50 million pounds of cost cuts would underpin profit in 2009-10.
Retailers across the world are struggling as consumers cut spending amid fears of a deep recession and job cuts.

It was long-predicted that the collapse of the debt bubble would lay waste to the high-end goods market. Who's next?

 

[rjmaiorano]

They had Q3 revenue increases, that is uncommon amongst 'luxury' retailers at the moment and they are cost cutting as most in their market are. They aren't in any real trouble.

 

[LookSharp]

Originally Posted by rjmaiorano

They had Q3 revenue increases, that is uncommon amongst 'luxury' retailers at the moment and they are cost cutting as most in their market are. They aren't in any real trouble.

Absolutely, but you have to 'read between the lines' on a lot of these economic doom stories. The UK and Europe has seen utterly massive job losses in the last quarter - and large paper-losses for many wealthy people - that hasn't yet filtered through into financial results. Just a year ago Waterford Wedgewood as making acquisitions now it's in administration.

 

[tiecollector]

They seem better off than some luxury brands.

They'll either lower their high prices or lower the quality, maybe a little of both. I think the best thing to do is start a Walmart line.

 

[andreyb2]

"Burberry said it planned to cut 250 jobs in its underperforming Spanish market, and close a sewing plant in Rotherham, northern England, resulting in up to 290 job losses."

Still less "made in England" items by Burberry?

Andrey

 

[kulata]

Originally Posted by tiecollector

They seem better off than some luxury brands.

They'll either lower their high prices or lower the quality, maybe a little of both. I think the best thing to do is start a Walmart line.

 

[chrome_dout]

Their regular prices have become pretty ridiculous. However I've seen some big discounts on Burberry which makes them a more appealing brand, can't say I'm surprised they are in a bit of trouble.

 

[fcuknu]

Yeah a 9 percent rise in revenues and their the ones in big trouble...

 

[acidboy]

They should start a diffusion line: B/X or Burberry Exchange.

 

[emmanuel]

Everybody is in trouble. If this continues I am sure some of the smaller labels will have to close their doors

 

[DoTheGrownup]

Maybe they should start selling scarves and baseball caps in China Town. There's a big market there.

 

[NH_Clark]

Originally Posted by tiecollector

They seem better off than some luxury brands.

........

+1

what I'd keep an eye on is the following:

* Q3 underlying revenue up 9 percent to 329 million sterling very much a plus when other brick and mortars are reporting declining QoQ and YoY revenues

* To cut about 290 jobs in Britain, 250 in Spain again, cost cutting in light of higher revenues always a good thing. Usually strengthens cash positions and net positions after the one time costs associated

* Profit guidance for 2008-09 unchanged !! kept revenue guidance in line with previous projections. Right now is the best time to "adjust" (read: lower) revenue expectations since it will get drowned out by all of the other companies doing the same. Those that don't adjust lower tend to be in a stronger fiscal position and can weather the storm

 

[ForeverMan]

So, I seems that i'm not going to invest in Burberry... but what about the other brands? I've heard that Valentino will not present their new collection at the upcomming show... Do you know what brands feel better?

 

[Lucky7]

Originally Posted by emmanuel

Everybody is in trouble. If this continues I am sure some of the smaller labels will have to close their doors

Maybe. Maybe not. Sometimes smaller companies can navigate the economic hardships easier. It's much easier to keep low overhead for a small company, than a multi national company such as Burberry...should be interesting.