Fashion group Burberry warns of a global slowdown in demand for luxury goods

The firm added that, if sales do not pick up, underlying earnings for 2023-24 will be towards the lower end of the market’s expected range of £552m to £668m.

It came after Burberry, which has operations in Castleford and Keighley in West Yorkshire, reported pre-tax profit falling to £219m for the six months to September 30, down from £251m a year ago, but underlying earnings came in better than expected at £223m, despite a 6 per cent fall.

Chief executive Jonathan Akeroyd said: “While the macroeconomic environment has become more challenging recently, we are confident in our strategy to realise our potential as the modern British luxury brand, and we remain committed to achieving our medium and long-term targets.”

The luxury industry is feeling the pinch as high inflation and rising interest rates squeeze consumer spending.

Burberry reported a marked slowdown in comparable store sales growth in its second quarter, at 1 per cent compared with 18 per cent in the previous three months.

First-quarter trading had been boosted by surging trading in China, Burberry’s largest market, as shoppers returned to stores after Covid lockdown measures the previous year.

But this faded away in the second quarter and the global pullback in spending hit overall trading.

Burberry said early signs of demand for its winter 2023 collection – the group’s first by designer Daniel Lee – were “encouraging”.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “The shine is dimming on the luxury sector as even higher-end consumers tighten their belts.

“Heralded as a more resilient corner of the economy, suggestions of missing targets and lower-end profits aren’t what investors have come to expect.”

“The work the group’s done to become a more premium luxury house is to be commended and will improve strength in the long-term, but there’s no getting away from the fact that particularly aspirational, younger shoppers are thinking twice before swiping their cards,” she added.

Charlie Huggins, Manager of the Quality Shares Portfolio at Wealth Club, commented: “Burberry's sales growth slowed significantly in the second quarter, as trading conditions became much more challenging. This is not a great surprise.

"Having splurged on luxury goods in the wake of the pandemic, wealthier consumers are now tightening their belts meaning the whole sector is starting to feel the pinch.

“Chinese consumers are vital for the luxury sector but spending from this cohort appears to be slowing. China's economy is struggling, with its real estate sector in a fine mess and this appears to be filtering through to Chinese consumer sentiment.”