UPDATED: Burberry says it is still committed to Leeds development despite tumbling profits
Luxury fashion firm Burberry has reaffirmed its commitment to create a new state-of-the-art factory in Yorkshire following a 24 per cent slump in its half-year profits.
The company reported underlying pre-tax profit of £146m in the six months to September 30, down from £151.7m over the same period last year.
It announced it is cutting 15-20 per cent of its product lines, aiming to focus on its newest ranges as it battles to attract shoppers in a volatile luxury goods market.
The firm announced last year that it was to create a multi- million-pound manufacturing and weaving facility in Leeds’s South Bank to produce its popular trench coat range, relocating its existing staff in Castleford and Keighley in the process.
Carol Fairweather, chief financial officer, told The Yorkshire Post that the plans for Yorkshire remained active but declined to give any further detail on the timetable of when it would begin work on the project.
She said: “As we said back in October there is absolutely no change regarding our manufacturing facility plans in Yorkshire.
“We are fully committed to Yorkshire, it is important for us, and we will give you more details as soon as we have them.”
Burberry is spending over £50m on the new facility, situated on the South Bank of Leeds, which will employ more than 1,000 people when it is completed.
Revenue at constant currencies dropped 4 per cent to £1.16bn. However, when accounting for currency fluctuations, revenue rose 5 per cent.
The luxury fashion firm said retail growth was led by strength in the company’s UK division, where like-for-like sales spiked 30 per cent as tourists flocked to London to take advantage of the drop in sterling in the second quarter.
But that growth was “offset by declines in wholesale and licensing, in part reflecting actions to build and reinforce luxury brand positioning”, Burberry said. Ms Fairweather added: “Overall revenue showed a two per cent underlying growth in retail, offset by a decline in wholesale.
“The Burberry website was relaunched successfully and we will be releasing a Burberry app in the coming weeks.”
She added that the company was cutting back on product lines ahead of the key Christmas trading period and would give greater prominence to its newest products, such as the bridle bag that was a top seller from its September runway show.
“We are delighted with everything we have in place for the festive season,” she said.
Burberry said in February it would move away from the traditional model of presenting seasonal ranges months ahead of their appearance in store, in favour of two collections a year that would be available in shops immediately.
The company explained that wholesale licensing income was hit by the planned expiry of a raft of licences in Japan, which accounts for more than half of that division’s revenue.
Global sales took a hit, with Asian and American like-for-like retail sales dropping by a “low single-digit percentage” while growth in Europe saw low single-digit sales growth in the first half, aided by UK tourist spend- ing.
The company closed 24 stores and concessions globally in the first half of the year, partially offset by 11 openings.
It comes as the company embarks on a strategic turnaround plan that has included simplifying their product line, revamping its digital store and cutting costs by as much as £20m over 2017.
Chief executive Christopher Bailey said: “In May we outlined plans to evolve how we work as a business and to drive Burberry’s future growth in a rapidly-changing luxury environment.
“Since then, we have made good early progress towards realising the significant opportunities ahead of us as we begin implementing our five strategies. We remain on track to deliver our financial goals.”
The company had already announced a 4 per cent drop in half-year sales to £1.16bn last month after weak demand in some overseas markets.