Burberry profits will be lower after lack of holiday splurge by luxury consumers

Burberry, the London-based luxury goods fashion house, warned Friday that profits this year would be lower than anticipated as wealthy shoppers, particularly in the Americas, tightened their belts during the crucial Christmas trading period.

In a statement, the company said its recent trading had been hit by a continued “slowdown in luxury demand” after rises in the cost of living and interest rates around the world.

“We experienced a further deceleration in our key December trading period and we now expect our full-year results to be below our previous guidance,” said Jonathan Akeroyd, the company’s chief executive.

Burberry said retail revenues for the three months to December 30 slid 7% to 706 million pounds ($900 million), and that its like-for-like sales, which strips out new additions or closures, declined 4% over the same period.

It warned that it expects unfavorable currency exchange rates to knock revenues by 120 million pounds and profits by around 60 million.

Following its statement, Burberry’s share price slid as much as 14% in early trading before ending the day 5% lower.

The company’s profit warning was its second in three months. In November, it warned that its sales growth was lagging behind targets due to pressure in the luxury market.

Other luxury brands, including Switzerland’s Richemont and France’s LVMH, have also warned of waning demand for their goods.

“The cracks appearing in luxury demand are very telling,” said Sophie Lund-Yates, an analyst at stockbrokers Hargreaves Lansdown. “So-called aspirational shoppers are one of the demographics pulling back, and Burberry is more exposed to this type of customer than super-high-end luxury.”