Burberry shares have fallen sharply after the luxury brand said it had failed to see the global pick-up in demand it had hoped for over the crucial Christmas season.
The UK company, which has been seeking to move upmarket under a turnaround plan initiated by chief executive Jonathan Akeroyd, had previously warned on its annual profits outlook in November.
At that time, it had reported encouraging signs for the first collection under the creative guidance of new designer Daniel Lee.
But Burberry said on Friday in an unscheduled trading update that retail revenue over the 13 weeks to 30 December was down 7% on the same period last year at £706m.
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Comparable store sales were 4% lower.
While the Asia Pacific region saw a 3% lift, they were 5% lower in Europe and down by 15% in the Americas.
It also warned that it expects unfavourable currency exchange rates to knock its revenues by £120m and profits by around £60m.
As a result, Burberry said it now expected full-year adjusted operating profits in a range between £410m and £460m.
In November, the prediction had been for profits towards the lower end of analysts’ forecasts of between £552m to £668m.
Shares fell 14% at the market open – the biggest one-day drop it had experienced since 2012 – but later settled 8% lower.
A downturn in demand has also been experienced by rivals including LVMH as the global economy slows amid continuing pressure from inflation and central bank efforts to tackle inflation.
In the key growth market of China, consumers have been shying away from major purchases due to the fallout from a property crisis.
Mr Akeroyd told investors: “We are continuing to deliver the transition to our new modern British luxury creative expression for Burberry, which started appearing in our stores in early Autumn.
“We are still in the early stages of executing on this, which has become more challenging against the backdrop of slowing luxury demand.”
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said of the update: “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 and that has consequences for valuations.”