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Burberry the luxury fashion brand based in Britain posted a drop in sales for the first half, which caused its shares to fall as weak demand at department stores helped to offset an uptick in its home market sales as tourists took advantage of the lower sterling pound.
Burberry stock has been one of the best performers since the Brexit vote on June 23 where voters opted to exit the European Union. Part of that was due to investors believing the company would see a benefit from a dropping pound. The pound fell 9% in day, its biggest drop in over four years.
Burberry, which has over 80% of its entire sales in international markets, announced that positive trading across Europe and a jump of 30% in sales in the UK helped generate an increase of 2% in its comparable sales for the quarter, the first time it has seen growth in that metric for the past four quarters.
However, total sales were down 4% to £1.16 billion equal to $1.44 billion for the six months ending September, as performance was hurt by a drop in revenues from wholesale and licensing.
On Friday, shares increased to a high of 14 months, partly anticipating a lift in sales as well as profit that was currency related.
The company said if the pound remained at its current level, its adjusted profit for the full year would be increased by over £125 million.
The maker of trench coats and luxury footwear incurs close to 40% of its total coasts within Britain, but has about 15% of its full sales there. Analyst’s estimate over half of Burberry’s home sales are from tourists.
CFO Carol Fairweather has said that demand was strong from tourists as well as consumers in Britain for the three months following the Brexit vote.
She added that the Chinese represented a big part of the strong sales of recent, as they have taken advantage of the exchange rate.
Burberry, which added Lily James an actress to its models this summer, has worked to improve stores, where its sales margins have been dragging behind industry rivals in the luxury sector.
Christopher Bailey said Burberry had made some progress with its self improvement plan within a retail environment that continues to be challenging.