July 10, 2013 9:18 am

Burberry posts strong sales growth

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A Burberry store©Bloomberg

Burberry showed it was back on trend with better-than-expected trading over the past three months, following problems last year that forced the British luxury goods group to warn on profits.

Retail sales rose 18 per cent to £339m in the three months to June 30, with retail sales from stores open at least a year up 13 per cent, above the top of the range of analysts’ expectations.

The shares rose 4.2 per cent to 1500p in lunchtime trading.

Carol Fairweather, incoming finance director, said the performance had been driven by strong fashion sales and a recovery in demand from China, where a slowdown last year had prompted the profit warning.

Coats and jackets performed well, as did large leather bags, including the Blaze, with its structured leather shape embellished with a gold padlock, and the Orchard bag, which harks back to classic Burberry styles. Menswear, where Burberry has been expanding its offer, also performed well.

“All of this combined to help deliver this performance,” said Ms Fairweather.

Burberry saw further opportunity in menswear, much of which was licensed in the past, she said. It now accounts for 24 per cent of the brand’s retail and wholesale business.

“Mens is our heritage and we are bringing it back,” said Ms Fairweather. She saw opportunities both in tailoring, which was now in 70 stores, and accessories, where mens’ products accounted for 20 per cent of the category.

The progress in menswear was underlined by Andy Murray’s wearing of Burberry after winning the Wimbledon men’s tennis title on Sunday and on a visit to Downing Street.

Sales from Chinese stores open a year were up by a figure in the “double digits”, Ms Fairweather said, with Chinese consumers “shopping across our pyramid” of products.

“We continue to be very pleased with our performance in China,” said Ms Fairweather.

Menswear and mens’ accessories had also performed well in China. “We are really responding to the way the Chinese male consumer likes to shop.”

The group reported double-digit comparable store sales growth in Asia-Pacific and the Americas, and high single-digit growth in Europe, the Middle East, India and Africa.

“The growth is not just coming from China, we are nicely balanced globally,” she said, adding that recent unrest in Brazil would not affect Burberry’s expansion plans there.

Customers were becoming “channel agnostic” she said, and Burberry was stepping up its click-and-collect service, whereby customers can order online and collect in stores, available from 23 outlets at present.

However, Burberry remained cautious over the outlook.

Chief executive Angela Ahrendts said: “The macro outlook remains uncertain and we will continue to focus our investment on profitable high-growth opportunities by channel, region and product categories.”

Burberry said there would be no change to its expectations for the full year, although it was expecting to “modestly” increase margins.

First-half underlying pre-tax profit was still expected to be below the year earlier period, due to factors including an expected 10 per cent fall in wholesale sales and the impact from buying in the beauty business.

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