Business World

Friday 24 February 2017

Burberry upbeat despite uncertainty

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Philip Whiterow

FASHION house Burberry today indicated demand for luxury branded goods such as its coats and leather bags remained strong despite the global uncertainty.

The company, which is famous for its red, black and camel check, said bumper sales through its Chinese outlets and flagship stores in London, Paris and New York helped half-year revenues jump by 30pc to £830 million.



Despite the figures coming in ahead of City hopes, shares opened lower today and have dropped more than 20pc since July on fears of a slowdown in China.



Burberry said its Chinese outlets, which it acquired a year ago, showed same store growth of 30% over the past six months.



Worldwide retail revenues rose by 45pc with like-for-like sales growth up slightly in the second quarter to 30 September to 16pc, from 15pc in the first three months.



Total retail growth slowed to 42pc in the second quarter from 49pc in the first.



Outerwear and large leather goods accounted for half of the growth, with the Burberry London trench coat range a major contributor.



Chief executive Angela Ahrendts said the company's first half performance "clearly demonstrates" the continued global momentum of the Burberry brand, though the group was prepared to "respond appropriately" if there is any significant change in demand in the luxury sector, she added.



David Jeary, an analyst at Investec Securities, said concerns about growth in China have been overdone and today's update underlines the strength of the group's strategy. He forecasts profits for the year of £365 million.



Burberry said wholesale revenues rose by a better-than-expected 20pc excluding China. Shoes, childrenswear, menswear and men's accessories all did well, Burberry said, especially in the United States and emerging markets.



Licensing revenue rose by 4pc, but like the retail arm, both licensing and wholesale's growth slowed in the second quarter compared to the first.



Over the remainder of the year, wholesale revenues are expected to slow again and rise by mid-single digits, against 9pc in the first half, with licensing to rise by a similar percentage to the first six months.



Margins improved slightly over the half with a modest rise expected for the full year.



Burberry added it expects to add 15pc more store space over the rest of the year through between eight and ten new stores, including a store in Paris and outlets in Latin America and China.



At the end of September, the group had 187 retail stores, 210 concessions. 44 outlet shops and 52 franchises.



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