AP News

Sector Snap: Burberry leads drop in luxury cos.

NEW YORK (AP) — The luxury sector took a hit Tuesday after Burberry PLC warned that profits this year will be at the lower end of market expectations.

The London clothier, like other luxury retailers, has prospered over the past few years even as others in the sector have been hammered by the global economic slowdown.

The report from Burberry appeared to shake that faith, sending a host of high-end retailers sharply downward.

Ralph Lauren Corp. led the Standard & Poor's in percentage decliners, falling more than 3 percent, or $5.36 per share to $154.95 in late morning trading. Shares of Tiffany Inc. slid nearly 2 percent, or $1.03 per share to $62.01. Saks Inc., which operates Saks Fifth Avenue, fell 1 percent or 11 cents to $11.33. Coach Inc.'s shares fell close to 2 percent or 96 cents to $61.64.

Brean Murray, Carret & Co., while saying that management at Coach "is among the strongest in retailing," downgraded the stock on valuation.

Burberry shares slumped more than 20 percent to 1,088 pence in London.

Burberry said retail sales in the 10 weeks to Sept. 8 were 6 percent higher than a year ago, but all of the growth was due to new stores opening. Comparing stores open for at least a year, retail sales were unchanged. And in recent weeks, it said there has been "a deceleration."

Retail sales accounted for around two-thirds of Burberry sales in the year to March 31.

"As we stated in July, the external environment is becoming more challenging," said Chief Executive Angela Ahrendts. "Given this background, we are tightly managing discretionary costs and taking appropriate actions to protect short term profitability,"

A Nomura Securities analyst Fraser Ramzan downgraded' Burberry's stock to "Neutral" from "Buy" because of the broader slowdown.

"The global economic crisis is dragging on and the longer it drags on the less confident even wealthier individuals become," said Jaana Jatyri of fashion forecasting company Trendstop. "Unfortunately, people lacking confidence do not shop at Burberry."

Burberry will issue a further market update on Oct. 11.


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