Efforts by Burberry to transform itself from a predominantly fashion wholesaler into a global luxury goods retailer paid off handsomely on Wednesday after the group unveiled an impressive 10 per cent jump in first half underlying sales.
The figure came in well above analysts’ forecasts of around 8 per cent and sent shares in the group up 3.9 per cent to 530.15p, a new all-time high.
In a trading update ahead of interim results on November 14, the company said strong growth in retail sales has helped underpin its solid results for the six months to September 30.
Underlying revenue, which excludes the financial impact of Burberry’s Taiwanese acquisition and it’s Spanish business affected by retail conversion and exchange rate differences, rose from £355m to £392m.
Of this, 43 per cent came from turnover at Burberry’s retail operations, where underlying sales rose 23 per cent. Like-for-like wholesale sales, which accounted for 46 per cent of total revenue, were up 1 per cent.
“As a whole, performance in the first half is consistent with expectations for the full financial year,” said Angela Ahrendts, chief executive. “Continued strength in outerwear and womenswear as well as the extraordinary consumer response to the launch of the Burberry Icons collection…have fuelled excellent retail performance across markets.”
Under Ms Ahrendts’s leadership, Burberry has steered its operation towards direct retailing of its fashion brand to consumers and away from bulk sales. Alongside this strategy of “retail-led growth”, the 46-year old American has also sought to move into under-penetrated markets such as the US and Asia through a policy of agressive expansion.
The company opened six new stores during the first half, with three located in the US mid-West and one on the east coast. It plans to six additional stores in the second half, pushing capital expenditure for the year to around £50m.
Melanie Flouquet of JPMorgan called the the sharp rise in like-for-like sales “impressive”.
“Angela Ahrendts means business when she says iconic products, accessories and Retail will be key drivers of future growth and it already shows in numbers,” she said in a research note.
Analysts at Merrill Lynch also issued a positive note, saying Burberry remains in its view “one of the most promising stroies in the luxury goods sector on an 18-months view.”
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