Fashion Brands Keep Optimistic As Sales Rise, Even Though There Are Warnings of Annual Profit Losses
Some of Britain’s biggest fashion brands are reporting bumper sales from UK shoppers and a growing number of customers abroad. Profits, however, have been hit as a strong pound makes its mark.
High-end label Burberry reported a 9 per cent increase in sales, up to £370 million, over the three months ending in June, and comparable sales were actually up by 12 per cent. Superdry owners SuperGroup, meanwhile, saw a rise of 3.2 per cent in like-for-like or comparable sales for the previous year, and Primark reported a 22 per cent sales rise, based on organic revenue or constant currencies, over the 16 weeks ending on June 21, 2014.
The trio of companies are hoping that the recent sales results are an indicator of a positive future, but Burberry has warned that the strong pound is likely to have a significant impact on profits. The brand says that wholesale and retail profits will be down by £55 million as the pound trades at a six-year high of $1.71.
Primark’s parent company, Associated British Foods (ASB) which also sells groceries, claims that its profits will be down by £50 million in comparison to last year because of currency movements.
However, the three companies are at the head of a charge on the overseas market by UK fashion brands keen to cash in on increasing demand from foreign customers. Discount clothes retailer Primark is set to open the doors of its first American store in Boston next year, and it already boasts three Paris stores. These French shops have so far ‘beaten expectations’ since opening in April of this year. ABF finance director, John Bason, said the stores were doing ‘exceptionally well’ and were ‘incredibly busy’.
This success contributed towards the recent sales rise and offset a 20 per cent sales drop in sugar, another major area of ABF’s business. This fall has been attributed to European Commission quotas, a price drop and lower Chinese production. The company is planning to reduce its sugar business’s workforce and plans to spend around £20 million on a restructuring programme.
SuperGroup, meanwhile, has expanded into Spain and Germany and is reporting strong overseas sales. The recent sales boost is also better news for the company, which saw a slump in the value of its shares in May after issuing a warning that like-for-like sales were down in the last three months of the firm’s financial year.
Despite pre-tax profits falling from £51.8million to £45.2million, Chief Executive Julian Dunkerton predicts ‘further profitable growth’ over the next year thanks to Superdry’s brand strength and recent investment. He regards recent performance as ‘solid’. The company recently invested in a newly created central warehouse, situated in Burton-upon-Trent in Staffordshire.
He says that new stores, particularly in Europe, are doing well and the company’s growth strategy is on course. The brand aims to further promote its womenswear, which currently only accounts for around a third of its sales. The target is for this area of the business to eventually make up half of all sales.