Luxury consumers insulate Burberry

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High-spending consumers have helped insulate Burberry Group from the worst of the global economic downturn, boosting full-year revenues at the British luxury goods brand by almost a quarter.

So-called travelling luxury consumers – wealthy shoppers from Asia, the Middle East and the Bric economies – have continued to open their purses at Burberry’s stores in London, Paris, Hong Kong and Las Vegas.

Burberry, best known for its distinctive tote bags and trenchcoats, on Wednesday reported pre-tax profit up 24 per cent to £366m in the year to March 31, from revenues up by the same margin to £1.86bn.

The figures failed to impress investors, however, with Burberry shares falling an initial 5 per cent, before partially recovering to close 1.2 per cent down at £13.69.

“We do feel that those flagship markets are somewhat sheltered from the global economic environment,” said Angela Ahrendts, Burberry’s chief executive.

“They are heavy tourist markets, you’ve got huge population density and you’ve typically got a higher percentage of wealthy individuals. We do make a disproportionate amount of our profits from those flagship cities.”

Burberry said it would spend £180m-£200m this year to expand its outlets, open new stores and increase its digital marketing presence.

The luxury goods group is preparing to open its 25,000 sq ft store in London’s Regent Street this summer, but declined to confirm whether it would be in time for the Olympics.

However, despite the influx of tourists to the British capital this summer due to the event, Ms Ahrendts said she was not expecting to see a marked sales rise there as the “real luxury customer” will shun the crowds.

The Regent Street store will be its largest to date, with the fashion group poised to also open in Chicago and São Paulo.

“There’s still enough appetite for them to grow dramatically,” said Amisha Chohan, analyst at Merchant Securities, adding that opening larger stores will help the group display its recently expanded product range which includes men’s products and perfume.

The 156-year-old seller of raincoats and leather goods is also preparing to open an outlet solely for menswear, attached to its Knightsbridge store. “It could be the beginning of a new concept,” Ms Ahrendts said.

During the year Burberry heightened its exposure to emerging markets with the opening of outlets in Taipei, Mexico and Brazil.

The expansion came during a time of uncertainty for the luxury goods sector, which has been hurt by Europe’s political turmoil and an economic slowdown in China.

Last month Aquascutum, the 160-year-old British luxury coat maker, collapsed into administration, and was bought by Hong Kong group YGM Trading for an undisclosed sum.

However, LVMH, owner of Louis Vuitton bags, Dior perfume and Dom Pérignon champagne, last month said sales had been buoyed by demand in the US and in Asia despite a slowdown in China’s economy.

Burberry’s diluted earnings per share rose from 46.9p to 59.3p, and a final dividend of 18p (15p) was proposed, bringing the total payout for the year to 25p (20p).

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