Falling pound fashionable among London tourists but fails to lift aviation

The contrasting effects of the slump in the pound were on display yesterday from Burberry and Ryanair.

Burberry said its sales had outpaced expectations thanks to tourists in London taking advantage of a weakened pound to buy its trench coats, scarves and gloves.

Meanwhile, Ryanair cut its profit outlook for the year as the decline in sterling weighs on fares.

The two UK companies, like their peers across the country, are finding their finances affected by the 17.7 per cent drop in the value of the pound against the dollar since the Brexit vote.

The pound ranks as the world’s worst-performing currency against the US dollar for the year to date. Its 17.3 per cent drop for the period puts it between the Angolan kwana and Guinean franc on the laggards table.

In reporting its 2 per cent gain in second-quarter retail sales, Burberry said a “significant outperformance in the UK”, as well as positive trading in Europe, had led to its first gain in comparable sales for four quarters.

“Improved performance from the traveling luxury customer in the second quarter was most significant in the UK,” London-based Burberry said, adding that comparable sales rose 30 per cent in that region.

Analysts had been expecting a 1 per cent rise in overall second-quarter retail.

Burberry has been one of the best-performing stocks since Britain voted to leave the Euro­pean Union on June 23. Through Monday, its shares were up 35 per cent for the year to date. Still they sank 7.5 per cent yesterday as the increase in British sales was offset by continued weakness in Asian markets.

In comparison, Ryanair stock had fallen 13.6 per cent since the Brexit vote.

The budget airline said yesterday that its full-year earnings are likely to increase by about 7 per cent rather than the 12 per cent previously estimated, because of the low-flying pound.

Net income is likely to be in the €1.3 billion (Dh5.25bn) to €1.35bn range, rather than between €1.375bn and €1.425bn as previously estimated, Dublin-based Ryanair said.

“The recent sharp decline in sterling post-Brexit will weaken second-half yields by slightly more than we had originally expected,” it said. “While higher load factors, stronger traffic growth and better cost control will help to ameliorate these weaker revenues, it is prudent now to adjust full-year guidance.”

Britain is expected to account for about 26 per cent of Ryanair sales this year, the carrier said.

* Agencies


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