'Everything is cheaper': Burberry UK sees tourist boom

"Everything here is cheaper than my hometown," says 25-year-old Patthanan Chatchavalthitiwath clutching her Burberry shopping bag.

The Thai student reckons she's saved up to £10 on the perfume she bought for her sister thanks to the pound's fall.

She is one of the overseas shoppers Burberry has credited for driving up UK sales by almost a third.

The British fashion house said tourists' higher spending power due to the drop in sterling drove the rise.

Comparable European sales, which exclude new store openings, were higher in the first half of the year, marking the first rise for over a year.

The firm, which makes just 15% of its sales in the UK, said the pound's fall would increase full year profit.

Patthanan Chatchavalthitiwath bought some perfume for her sister

Patthanan, shopping in Burberry's flagship store on London's Regent Street, is one of the many foreign tourists taking advantage of the fact that they are currently getting substantially more pounds in exchange for their foreign currency.

"I buy a lot of clothes, shoes, perfumes and cosmetics. Everything is cheaper than in my country particularly brand names," she says.

The pound has fallen almost 20% since the Brexit vote on 23 June, and around 16% against the euro.

The drop has helped to drive overall tourist spending higher.

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According to FTSE 100-listed payments processor Worldpay, foreign card spending growth was up 3.4% in August compared with the previous year, and online sales growth rose by 5.3%. High Street sales were up 3.0%.

The most recent official statistics also show signs of a tentative rise in tourism, with overseas residents making a whopping 3.8 million visits to the UK in July, up 2% on the same month last year. In total, they spent some £2.5bn.

Total sales drop

However, the boom in UK tourism hasn't been enough to offset Burberry's other woes.

Total sales at the designer fell, with Burberry blaming the 4% drop to £1.16bn in the six months to the end of September on a fall in wholesale and licensing revenues, which dragged down its overall performance.

Nonetheless, Burberry, which has been overhauling the business including redesigning its website and offering customers the opportunity to personalise products, said it was on track to meet its financial goals for the full year.

Burberry's overseas earnings are worth more after the fall in sterling

Because of the pound's fall, the money Burberry makes abroad in dollars, euros and yen is worth more back in the UK as those currencies buy more pounds when converted into sterling.

In July, it said the drop in the pound would boost full year profit by around £90m, but it said the continuing falls in sterling meant it now expected this figure to rocket to £125m.

'Attractive'

Current chief executive and chief creative officer Christopher Bailey, said the external environment remained "challenging" but that the "strength of our brand give us confidence for the future".

Mr Bailey will relinquish his chief executive role next year, with Marco Gobbetti, who currently runs French luxury label Celine, taking over the role.

The firm said some of its strongest performers in the first half of the year were bags. Its Bridle bag was the best-selling item from its September catwalk collection, and its new rucksack and Buckle bag collection also did well.

George Salmon, equity analyst at Hargreaves Lansdown, said the pound's fall had made a trip to Burberry's UK shops "a more attractive option for overseas luxury shoppers".

"With the cost of the flights justified by the saving on just a handful of Burberry's premium products, the group is already seeing a significant increase in luxury consumers taking advantage of the lower pound," he said.

However, he cautioned that with UK sales making up a relatively small percentage of Burberry's business, conditions for the luxury retailer remained difficult.