Shares in Burberry are down more than 5% this afternoon after the high-end fashion retailer reported a decline in revenues and profits as consumers reel in spending on luxury goods.

The news was not unexpected after Burberry warned in January of lower demand for its trademark trench coats and tartan check designs amid the cost-of-living crisis and elevated interest rates.

Others in the sector are feeling the pain as well, with fellow British brand Mulberry last week reporting a 4% decline in sales as luxury spending slowed in the UK and Asia. In March, fashion group Kering issued a profit warning saying that demand for its leading brand, Gucci, had dried up in China.

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Burberry sales in China were 2% higher during the year to March 30 but nosedived by 17% in the final quarter. Sales in the US were 12% lower for the year as a whole.

This poor performance in its two biggest markets drug overall annual sales down by 1%, while operating profit fell by more than a third to £418 million.

Yanmei Tang, an analyst at Third Bridge, said Burberry is struggling to clearly define and elevate its offering despite efforts to take the 168-year-old brand further upmarket to become the epitome of "Modern British Luxury". Chief executive Jonathan Akeroyd admitted this has been harder than expected amid slowing demand, but added that he remains confident in the strategy.

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“We are using what we have learned over the past year to fine-tune our approach, while adapting to the external environment,” he said.

Trading is expected to remain challenging through the first half of the current financial year, Burberry said, with unspecified cost savings being deployed to prop up the bottom line.

The company's shares have more than halved from their standing at 2,525p a year ago, leaving the stock price back near the lows plumbed during the early stages of the pandemic.

Its fortunes now lie in the hands of the economy and particularly that of China, whose shoppers typically account for about a third of global sales of luxury goods. That country, however, is facing its own pressures including slow growth, high youth unemployment, and a property market in disarray.