Burberry Profit Drops at Difficult Time for Luxury

It wasn't the easiest six months for the British retailer.
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Eliza Brooke
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It wasn't the easiest six months for the British retailer.
Behind the scenes of Burberry's holiday campaign. Photo: Burberry

Behind the scenes of Burberry's holiday campaign. Photo: Burberry

Halftime break. On Wednesday morning Burberry released its interim results for the first half of fiscal 2015, the six-month period that ended September 30 and which turned out not to be the brand's best. 

Although revenue grew 7 percent during the period, the company's profit margin dropped from 16.8 percent to 13.8 percent, totaling £152.2 million (about $241 million) in the first half. The cause? Unfavorable exchange rates, largely, which took a £31 million bite out of Burberry's profits. According to the company, that would have looked more like 6 percent profit growth, had there been no adverse exchange climate. 

Add to that trouble a "more difficult retail environment" and investments in long-term growth initiatives, and you've got what Burberry expects to be some "downward pressure" on its margins for the rest of the year. The British brand also anticipates wholesale revenue to drop by a mid single-digit percentage in the second half of fiscal 2015 after growing 8 percent in the first six months, thanks to wholesale clients taking a more reserved tack when selling in Europe and Asian travel retail markets. 

What is working for Burberry? At the moment, rainwear, women's Prorsum, men's tailoring, solid leather bags and soft accessories are selling well. And while traffic in stores is somewhat iffy, Burberry's online channel is solid.