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Burberry, known for its raincoats and plaid, is focused on cutting costs and improving operational efficiency as it continues to gain market share across the board in the luxury sector, said Stacey Cartwright, the company's chief financial officer and executive vice president.

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Burberry PLC on Wednesday reported a further slowdown in sales growth for its fiscal first quarter as the economic downturn continued to hold back demand. However, the U.K.-based luxury-goods company said it remains confident it can deliver growth over the long term.

Burberry, known for its raincoats and plaid, is focused on cutting costs and improving operational efficiency as it continues to gain market share across the board in the luxury sector, said Stacey Cartwright, the company's chief financial officer and executive vice president.

Sales in the quarter ended June 30, traditionally a slow period, rose 8% to GBP 229 million ($373 million). However, that was a slowdown from the 14% growth recorded in the fourth quarter of fiscal 2009 and the 30% seen in the third quarter.

The performance was driven by Burberry's operations in the U.K. and South Korea. Conditions remain difficult in the U.S., where retail revenue, stripping out currency fluctuations, fell 14%.

Sterling's weakness helped inflate sales denominated in other currencies. Stripping out currency fluctuations, total first-quarter sales fell 4%. That compares with a 5% drop in the fourth quarter of fiscal 2009 and 9% rise in the third quarter.

"Burberry has made a solid start to the year in what remains a challenging environment," said Chief Executive Angela Ahrendts. "We continue to execute on our strategies by product, region and channel, while driving operational and cost efficiencies. Our brand momentum, strong product designs and continuing back-of-house improvements mean that we are well-placed to deliver sustainable long-term growth."

Retail revenue, stripping out currency fluctuations, rose 12% from a year earlier. Retail sales from sales open at least a year were unchanged from a year earlier.

But, in an indication of how department stores world-wide continue to scale back their orders, wholesale revenue tumbled 28%. That figure was also dented by the closure of stores, particularly in Spain, and the conversion of Burberry Middle East to retail from wholesale. The steep drop, however, is consistent with company forecasts that wholesale revenue would be down about 25% in the first half of fiscal 2010 from a year earlier.

Shore Capital analyst Kate Calvert said Burberry has delivered a "very reassuring, robust performance," noting the results are up against "very tough" comparable figures. "The numbers are generally in line with consensus, with slightly better retail making up for a weaker wholesale performance," Ms. Calvert said.

In May, Burberry said it swung to a net loss of GBP 6 million for the year ended March 31 from a net profit of GBP 135.2 million the previous year, hurt by restructuring costs and heavy discounting. The loss was partly due to the company writing down the value of stores in Spain, as well as from a GBP 55 million charge for its cost-cutting program, which included a 15% reduction in its work force. However, annual sales rose 21% to GBP 1.2 billion.

The company is scheduled to report earnings for the six months ended Sept. 30 on Nov. 17.

Credit: By Lilly Vitorovich