Burberry sales fuelled by growth in China

Burberry reported a strong rise in first-quarter sales as it maintained healthy growth in China, but warned that the strong pound would have a "material" effect on the British luxury brand's full-year profit.

The trenchcoat maker on Thursday said same-store sales rose 12 per cent in the three months to the end of June, as total retail revenues rose to £370m - a 17 per cent increase on the same period last year at constant currencies.

Shares in the company rose 5 per cent in early trading to £14.90 - a favourable reaction from investors as Burberry prepares to face shareholders' ire at its annual meeting on Friday over a pay deal for its controversial chief executive and chief creative officer, Christopher Bailey.

The former creative director took over in May from Angela Ahrendts, who elevated the company to global luxury brand status - as well as the FTSE 100 blue-chip index - and was rewarded handsomely, becoming one of Britain's best-paid executives.

The Investment Management Association, which has taken over responsibility for the Association of British Insurers' investment affairs, has issued an "amber top" alert over Burberry's pay policies.

Investors are meanwhile unhappy about share awards - worth more than £20m at the current share price - that were granted before Mr Bailey became chief executive.

Citing an "uncertain external environment", Mr Bailey said annual pre-tax profit from Burberry's retail, wholesale and licensing activities would be reduced by about £65m this year. That compares with reported pre-tax profit in the year to the end of March of £444m.

Carol Fairweather, finance director, warned that - if current exchange rates persist - the impact would inevitably worsen next year as profits increase.

Sterling this month reached a six-year high against the dollar amid gathering momentum in the economy, strong manufacturing data and expectations that the Bank of England will become the first leading central bank to raise interest rates.

Ms Fairweather said that sterling had "appreciated against everything", highlighting the dollar and the renminbi in particular.

She added that there was no change to the revenue guidance given at annual results in May.

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