ITP Interparfums

LONDON—Shares in Burberry Group PLC fell sharply Thursday after the British fashion house reported a big fall in first-half same-store sales, amid lower spending in Hong Kong and mainland China.

The disappointing results are further testing Chief Executive Chris Bailey, Burberry's longtime creative director, who has presided over a period of lackluster growth since taking the reins from former CEO Angela Ahrendts last year.

Revenue for the six months ended Sept. 30 came in at £ 1.1 billion ($1.7 billion), unchanged from the same period last year, as growth at its retail operations was offset by a weaker performance at its wholesale and licensing arms. Analysts polled by FactSet had expected revenue of £ 1.16 billion.

Burberry shares plunged 12% in early trading in response to the downbeat figures, which the company blamed on traveling Chinese consumers and its geographic mix. The shares were down 9.6% in early afternoon.

A weaker euro has made shopping in Europe cheaper, a trend that has hammered Burberry's results in recent quarters as the British brand is relatively small on the continent compared with rivals. Separately, wealthier Chinese consumers are increasingly traveling to Japan to buy luxury goods, a country that currently makes up just 2% of Burberry's wholesale and retail revenue.

"The second quarter was a difficult quarter driven by the macro environment," Chief Financial Officer Carol Fairweather said on a call with reporters. Speaking about Chinese shopper she said: "We want to make sure that wherever they travel we can serve them brilliantly but the way they've traveled this quarter has amplified the numbers."

Exane BNP Paribas analyst Luca Solca said Burberry had significantly missed his second-quarter expectations, describing the results as "weak."

Retail revenue rose to £ 774 million from £ 748 million, while same-store sales climbed just 1%, a marked slowdown from the 10% increase reported for the same period last year. "In the second quarter, demand from luxury consumers, particularly Chinese customers, was affected by a more challenging external environment," the company said.

Wholesale revenue fell to £ 305 million from £ 317 million and licensing revenue—which includes revenue from the company's beauty business—dropped to £ 26 million from £ 35 million.

"The external environment became more challenging during the half, affecting luxury consumer demand in some of our key markets. In response, we have intensified our focus on driving sales and productivity, while taking swift action on discretionary costs," Mr. Bailey said.

Burberry said it expects adjusted profit before tax for fiscal 2016 to between £ 434 million to £ 461 million.

Revenue fell 2% to £ 377 million in the Asia-Pacific region. The region, Burberry's largest by revenue last year, has suffered a slowdown as the Chinese government has cracked down on corruption and a weaker euro has encouraged Chinese shoppers to buy abroad.

Burberry said same-store sales in the Asia-Pacific region were impacted by a continued—and deeper—decline in Hong Kong in the second quarter compared with the first. In mainland China, comparable sales decreased slightly in the half, in the context of weakening consumer sentiment in the market in the second quarter.

"The fact that Burberry has above sector-average exposure to the Chinese consumer is not helping given increasing Chinese macro concerns," said RBC analyst Rogerio Fujimori in a recent note ahead of Burberry's results.

Other luxury companies have struggled, too, with Prada SpA last month reporting its net profit fell by almost a quarter in the first half as sales slumped in mainland China and Hong Kong.

Ms. Fairweather said Burberry has moved to cut costs in an attempt to mitigate the impact that weaker sales could have on full-year profit. The company has frozen new hiring, except for in its retail business, and has cut spending on travel among other measures.

In Japan, the world's second-largest luxury market, the company recently ended a 45-year pact with its last Japanese licensee, deciding that it wanted to take full control of its brand. Ms. Fairweather said Burberry is "significantly underpenetrated" in Japan but is now moving to increase its presence.

In the Americas, Burberry reported revenue rose 6% to £ 286 million. Revenue edged up 1% to £ 416 million in Europe, the Middle East, India and Africa. Burberry said 60% of revenue in the region is generated from the traveling luxury customer, with same-store sales growing by over 20% in Italy, France and Spain in the first half. The U.K.—which makes up one-third of the EMEIA region's retail revenue—did less well as the strength of the pound against the euro discouraged shoppers from spending there.

Since 2012, when Burberry decided to take control of its beauty and fragrance following the end of a long-term licensing deal with Interparfums SA, the company has been working to gain more share in the beauty market. It has launched new fragrances and opened a small handful of beauty-focused stores. Revenue from the beauty division climbed to £ 82 million from £ 79 million a year earlier.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

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(END) Dow Jones Newswires

October 15, 2015 08:45 ET (12:45 GMT)

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