Fashion giant Burberry has said the slowdown in demand for its luxury goods worsened in December as wealthy shoppers tightened their belts.

The London-based fashion house slashed its profit guidance for the year as a result.

It said trading has been affected by a continued “slowdown in luxury demand” after rises in the cost of living and increases to interest rates globally.

Jonathan Akeroyd, chief executive officer of the firm, said it saw a “further deceleration in our key December trading period” which will weigh on its profitability.

Burberry had already seen its shares slump following its previous update in November, when it warned sales growth was lagging behind targets due to pressure in the luxury market.

On Friday, Burberry revealed retail revenues for the three months to December 30 slid by 7% to £706 million.

It said like-for-like store sales dropped by 4% over the key trading period.

The firm benefited from a rebound in Asia, driven by China and Japan, but saw sales tumble 15% in its Americas market.

Burberry told shareholders it now expects an operating profit of between £410 million and £460 million for the year to March, as a result.

It also warned that it expects unfavourable currency exchange rates to knock its revenues by £120 million and profits by around £60 million.

Mr Akeroyd said: “We are continuing to deliver the transition to our new modern British luxury creative expression for Burberry which started appearing in our stores in early autumn.

“We are still in the early stages of executing on this, which has become more challenging against the backdrop of slowing luxury demand.

“We remain confident in our strategy to realise Burberry’s potential and we are committed to achieving our £4 billion revenue ambition.”