Shares in fashion house Burberry fell seven per cent yesterday as it faced up to a soft UK market and arned of further revenues pressure at its wholesale arm.
The company, which on Tuesday named Angela Ahrendts as its new chief executive on a package worth up to $27.3 million (#15.6 million) over three years, said business in the UK had been affected by the July bombings in London.
In a first half trading update, Burberry posted a three per cent rise in global sales to #355 million for the six months to the end of September, compared with a 14 per cent increase a year ago.
The company said it had been helped by sales in new and refurbished stores as it reported strong growth of five per cent in North America and Asia, compared with a one per cent fall in sales in Europe.
This reflected the "soft" market in the UK, where it sells through stores such as Harrods, Harvey Nichols and Selfridges, as well as at its own boutiques.
Chief financial officer Stacey Cartwright said: "In the UK we are seeing some of the toughest trading conditions for 20 years, as reported by other retailers.
"Our business is particularly London-centric and London in particular has been impacted since the July 7 attacks."
Sales at the company's boutiques worldwide were up nine per cent in the first half, from #111 million to #124 million. Burberry said it was on track to increase average selling space nine per cent over the course of the financial year, excluding the acquisition of 12 outlets in Taiwan.
But sales in Burberry's wholesale arm, which account for 54 per cent of total revenues, fell one per cent in the first half from #197 million to #191 million.
The company said it expected further decline in the second half on the basis of orders for its spring/summer 2006 collections so far.
Seymour Pierce research analyst Rhys Williams said the luxury goods market remained "difficult" and lowered his profits forecast from #164 million to #162 million. Pretax profits in 2005 were #166.9 million.
Ms Ahrendts, currently executive vice president of US clothing company Liz Claiborne, will take over from Burberry chief executive Rose Marie Bravo when she moves to the new role of vice chairman next July.
Ms Bravo, aged 54, has been widely credited with transforming Burberry from a struggling UK retailer into a global fashion brand in her eight years in charge.
Her departure from the top job next July will follow the demerger of Burberry from its major shareholder GUS.
Retail conglomerate GUS, which also owns Argos, is due to sell its 66 per cent in Burberry - worth more than #1 billion - in December.