(Bloomberg) -- Burberry Group Plc shares fell the most in a year after the British trench coat maker reported declines in its Asian business and worsening results at its wholesale unit, offsetting a Brexit-inspired boost in tourist spending in the U.K.

The stock declined as much as 10 percent in London, the biggest intraday drop since Oct. 15 of last year. Consumer demand remained weak in Hong Kong -- a key luxury market that accounts for about 8 percent of Burberry’s revenue -- with sales falling by more than 10 percent in the first half of its fiscal year. The company also lowered its sales outlook for the wholesale business to a decline of about 15 percent in the second half, worse than the 10 percent falloff expected earlier in the year.

The luxury goods industry is grappling with falling demand from Asian shoppers, prompting companies such as Richemont and Hermes to provide disappointing outlooks. In response, Burberry’s been cutting prices in Hong Kong and Macau. Complicating matters, many fashion companies have reshuffled management: Burberry has a new CEO and finance chief joining next year. Not all luxury companies are hurting, as industry bellwether LVMH posted sales that beat estimates last week.

“I think it’s fair to say that expectations were running high after LVMH last week, so an in-line set of figures has caused some profit-taking,” Julian Easthope, an analyst at Barclays, said by phone.

Wholesale Decline

Burberry fell 7.5 percent to 1,398 pence at 10:46 a.m. in London. The shares had risen 36 percent from the June 23 Brexit referendum until yesterday.

Wholesale revenue from the U.S. declined 25 percent in the first half of the year, Chief Financial Officer Carol Fairweather said on a call with reporters. Burberry sees a similar decline in that business through the second half of the year and the company will focus on controlling costs rather than shutting stores in Hong Kong, the CFO said.

For a Bloomberg Gadfly commentary on Burberry’s results, click here

“To reinvigorate our brand and elevate it, we were comfortable letting that number land where it did,” said Fairweather, referring to the U.S. decline. The company maintained its full-year profit outlook and said it’s on track to reduce costs by about 20 million pounds ($24.5 million) this year.

Cheaper Bags

Spending on luxury items in the U.K. is rising as sterling’s fall has made Burberry’s scarves and bags cheaper for shoppers visiting from China and other countries. Sales rose by more than 30 percent in the U.K, the company said, boosted by demand for its runway rucksack and the new Buckle bag collection. About 15 percent of its retail sales came from the U.K. in the first-half of the year, it said, up from 10 percent previously.

Burberry also said the weakness of sterling will add as much as 125 million pounds to full-year profit, based on recent exchange rates. In July, the company forecast a 90 million-pound boost.

“Fiscal 2017 should be difficult but the pound’s weakness provides a welcome breathing room,” RBC Capital analyst Rogerio Fujimori said in a note.

To contact the reporter on this story: Thomas Buckley in London at To contact the editors responsible for this story: Matthew Boyle at, Thomas Mulier

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