In the wake of a persistent global slowdown in luxury consumer demand, Burberry has issued a stark profit warning that underscores the challenges facing the luxury fashion sector. The unexpected announcement, which arrived earlier than anticipated, has cast a shadow on the company’s financial prospects.

Burberry now anticipates that its adjusted operating profit for the fiscal year ending on March 30 will range from £410 million to £460 million, a significant adjustment compared to its previous guidance. The luxury brand had originally planned to unveil its fiscal third-quarter sales figures on January 19, making this announcement a surprising turn of events.

Adding to its financial woes, Burberry revealed that, based on foreign exchange rates as of December 29, it expects to face a currency headwind of approximately £120 million affecting its full-year revenue and around £60 million impacting adjusted operating profit.

This announcement had an immediate impact on the market, as Burberry’s shares plummeted by 7 percent to £12.65 following the news.

Jonathan Akeroyd, the CEO of Burberry, commented on the situation, saying, “We are diligently executing the transition to our new modern British luxury creative vision for Burberry, which began appearing in our stores in early autumn. However, the task has become more challenging in the face of a slowing luxury market.”

He went on to say, “We observed a further decline in our key December trading period, and we now expect our full-year results to fall short of our previous projections. Nevertheless, we remain steadfast in our commitment to realizing Burberry’s full potential.” Akeroyd reaffirmed Burberry’s determination to achieve its revenue goal of £4 billion in the medium term.

For the 13-week period ending December 30, Burberry reported a 7 percent drop in retail revenue at reported rates, amounting to £706 million. When considering constant exchange rates, the decline narrowed to 2 percent. During this quarter, comparable store sales declined by 4 percent, with an interesting outlier in the Asia-Pacific region, which posted a 3 percent increase largely attributed to gains in Mainland China. Conversely, the EMEIA region (Europe, Middle East, India, and Africa) experienced a 5 percent sales dip, while the Americas recorded a notable 15 percent decrease in sales.

Burberry had previously alerted the markets in November that both sales and profits were likely to land at the lower end of its earlier projections. The company had initially anticipated low-double-digit growth for the full fiscal year and projected adjusted operating profit within the range of £552 million to £668 million. The updated guidance suggests that adjusted operating profit could lean towards the “lower end” of this consensus range.

Jonathan Akeroyd highlighted the current economic environment as an exceptional challenge, noting that it differs from historical patterns where softness in one region could be offset by strength in another. The overall downturn in luxury demand now presents a unique and multifaceted challenge for Burberry.

As Burberry grapples with these headwinds, it underscores the broader challenges facing the luxury fashion industry, which has been grappling with shifts in consumer behavior, economic uncertainties, and evolving market dynamics. The brand’s ability to navigate these turbulent waters and execute its strategic vision will be closely watched in the coming months as it seeks to regain its footing in the luxury market.