LONDON: British luxury brand Burberry reported a 34% drop in annual operating profit on Wednesday after sales fell sharply in China, its biggest market, in the final quarter.
Burberry had previously warned that its ambition to take the 168-year-old brand further upmarket, to become the definition of "Modern British Luxury", had been harder than expected after demand for luxury slowed.
Like-for-like sales fell 12% in the final quarter, dragged down by a 19% slump in China, and wiping out gains made earlier in the year, it said.
Chief Executive Jonathan Akeroyd said that while the financial results underperformed the company's original expectations, it had made good progress refocusing its brand.
"We are using what we have learned over the past year to fine tune our approach, while adapting to the external environment," he said, while stating that he remained confident in the strategy.
The British fashion house has lagged high-end competitors like Hermes and Prada which have reported increases in sales.
However the sector as a whole is still struggling. Gucci owner Kerring, its closest rival, saw first quarter sales decline by 10%.
The world's largest luxury group, Louis Vuitton-owner LVMH, also reported weak sales in its latest quarter as spending on luxury items slowed.
For Burberry, the Americas continued to be a weak spot for the company, with comparable store sales down 12% in both the year and in the fourth quarter.
Sales in Europe, which had been improving, also fell in the final quarter, recording a 3% drop.
Akeroyd said Burberry expected the first half of its current financial year to remain challenging, but it expected to see the benefit of the actions it was taking from the second half.
Creative director Daniel Lee is key to the brand's repositioning. He showed his third collection at London Fashion Week in February, which focused on the brand's outerwear heritage. (Reporting by Paul Sandle and Suban Abdulla; Editing by Kate Holton)
