Burberry reels as rich cut back: Shares in biggest fall since 2012

Burberry suffered its biggest share price fall in more than a decade – thanks to subdued demand for luxury goods.

In a bleak update, the London fashion house said it was ‘unlikely to achieve’ its annual sales targets if the slowdown in spending on expensive clothes and accessories continued.

It warned this would lead to profits coming in at the lower end of expectations of between £552million and £668million.

Shares in the FTSE 100 firm fell 11.15 per cent or 194.5p to 1,550p – the biggest one-day decline since September 2012.

Chief executive Jonathan Akeroyd also renewed calls for Chancellor Jeremy Hunt to scrap the tourist tax in his Autumn Statement next week. 

He said business in the UK was suffering as a result of the Government’s refusal to reinstate VAT-free shopping for overseas visitors.

Akeroyd said ministers’ stubbornness was a ‘missed opportunity’ to cash in on a tourist rebound after the pandemic.

Warning that spending in the UK by Americans and visitors from the Middle East was lagging behind Europe, he said: ‘It is a pity that people are choosing to spend in Paris rather than in London.’

More than 400 business leaders have backed the Mail’s campaign for the Chancellor to scrap the tourist tax.

But like rival luxury brands, Burberry’s problems run deeper, with demand for expensive goods suffering amid global economic turmoil and geopolitical uncertainty.

Burberry said store sales increased just 1 per cent over the three months to the end of September following an 18 per cent rise in the previous quarter.

Demand in China has dwindled after an initial post-pandemic bounce-back, with sales falling 8 per cent. 

Economic pressures in the US pushed sales in the Americas down 10 per cent in the second quarter.

The brand is pinning its hopes on new creative director Daniel Lee, who made his debut runway collection for Burberry at London Fashion Week in September.

But the slowdown in business has taken the gloss off the industry and luxury firms’ share prices.

Louis Vuitton owner LVMH – the world’s largest luxury group – saw revenue growth slow to 9 per cent in the three months to the end of September from 17 per cent in the previous quarter.

There have also been warnings from Cartier owner Richemont and Gucci owner Kering in recent weeks.

Russ Mould, investment director at AJ Bell, said: ‘Traditionally, the wealthy clientele who shop for expensive clothes and accessories are seen as being insulated from the impact of higher borrowing costs and rising prices, but apparently they are feeling some of the pain.’