Burberry expects strong profit as sales rise

AP News
Posted: Apr 19, 2011 6:19 AM
Burberry expects strong profit as sales rise

Shares in British luxury goods company Burberry Group PLC jumped Tuesday after the company reported strong second-half sales and predicted a full-year profit at the top end of market forecasts.

Burberry's popularity in the Asia Pacific region, particularly Hong Kong and Taiwan, led sales 33 percent higher in the six months to March 31, compared to a year earlier.

Chief Executive Angela Ahrendts said the company expects full-year pretax profit to be at the top end of market forecasts, or around 347 million pounds ($564 million).

"While the luxury industry faces global challenges in the year ahead, we remain confident in our team's ability to outperform, underpinned by the consistent execution of our key strategies," said Ahrendts in a trading update.

Retail revenues were 42 percent higher at 596 million pounds ($972 million), while wholesale revenues rose 14 percent to 214 million pounds ($349 million).

Shares in the company, known for its distinctive red, black and brown plaid fabric, were up 6 percent at 1,216 pence in midmorning trade on the London Stock Exchange.

Analysts said the company is outperforming its peers in the luxury sector.

London-based stockbroker Seymour Pierce maintained its "buy" rating on the company.

"While the share are trading on a premium to its luxury peers, we believe this is more than justified by the fact that we are forecasting Burberry to grow profits at least twice as fast as its main peers," analysts said in a research note.

Burberry has transformed itself in the five years that Ahrendts has held the top job, joining the company from Liz Claiborne Inc., using star power such has "Harry Potter" actress Emma Watson in advertising campaigns to counter a perceived overexposure of the famous plaid fabric.

During the global financial crisis, the company instituted a cost-cutting program that slashed jobs in Britain and Spain, but it stuck with store openings in Asia and the Americas. This year the company plans a 12-13 percent increase in average retail selling space, with a bias toward China, Latin America and the Middle East.

Burberry will report full-year results on May 26.