Candy check sweetens sales at Burberry

Switch on to Computacenter; Hitch your wagon to Parkdean shares
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The Independent Online

Burberry has been the height of fashion since it started strutting its stuff on the stock market 18 months ago. Its shares have soared higher than autumn/winter hemlines since this column tipped them last July.

And the group was in the pink again yesterday after strong demand for its new candy check accessories range and Breast Cancer-themed trenchcoat helped underlying sales rise15 per cent in its third quarter.

The company has emerged relatively unscathed from the toughest trading conditions to plague the luxury goods industry for three decades after securing superstar status for its trademark beige check. Swanky new stores across the globe and high-profile advertising campaigns fronted by supermodel Kate Moss have transformed the antiquated British brand into a must-have for the fashion cognoscenti.

Strong demand for its spring/summer ranges, which see the group diversify from check and into big floral prints, helped sales in its wholesale division (mainly to department stores) leap by 23 per cent during the quarter. Hence it nudged up its overall expectations for sales from this channel to high single digits.

Its licensing revenues, which includes the valuable Japanese market, shrugged off the impact of the falling US dollar to rise 10 per cent - and this with volumes flat in Tokyo. Its new Brit fragrance was a Christmas best seller, boding well for the prospects of this lucrative division.

But even the mighty Burberry is not immune to the odd faux-pas, and yesterday it was the group's retail sales that raised eyebrows. An insatiable appetite for designer Christopher Bailey's coats and bags from its American fan base was not enough to disguise a "sluggish" UK market, still smarting from a lack of well-heeled tourists.

Retail sales may have grown 11 per cent at constant exchange rates but like-for-like sales rose just 1 per cent, below analysts' expectations. The stock's bulls stressed that this was on top of very tough comparisons but others chose to focus on the deceleration this represented from the first half of the year.

The stock's vintage qualities make it a safe hold but at 19 times its 2004 profit/earnings ratio, the shares, which closed more or less flat at 388.5p last night, look as fully valued as its trenchcoats for now.

Switch on to Computacenter

The rally in Computacenter's share price - which has more than doubled since February - stalled yesterday when the market knocked nearly 5 per cent off the stock after the company issued a trading statement.

Investors, however, should stay connected to this business which not only supplies computer hardware to businesses but installs it and provides support services.

The shares have risen from 222.5p to 470.5p in less than a year. However, yesterday's pre-close update appeared to introduce a cautious note on turnover. The company said revenues would be down in 2003 because the price of the PCs it supplies to corporate customers fell during the year.

Deflation in the PC market is hardly new. But it has been exacerbated by the dollar's fall, making US-made PCs even cheaper.

Computacenter's top line will be down for 2003, but the company will still meet its profit targets for the year, so just think what it might achieve once the dollar inevitably reverses its downward trend and the top line starts rising again.

The company has maintained its profit figures by selling more of its support services. This is its biggest growth area anyway, so yesterday's statement is actually quite reassuring rather than suggesting any weakness in the business.

Certainly the market has become used to some very bullish results from Computacenter over the past year or so, and the relatively muted language of yesterday's statement probably gave one or two people who were looking for an exit an excuse to sell.

Quite rightly the company is saying it is too early to predict the outcome for 2004. However, if you believe 2004 will be a more positive year than 2003 for the economy, then Computacenter, which trades on a forward multiple of nearly 19 times, is well worth buying.

Hitch your wagon to Parkdean shares

A caravan holiday might not be to everyone's taste but, as figures from the caravan park operator Parkdean show, demand remains strong.

Perhaps that is because the holidays are reasonably cheap, or perhaps because of the locations. Sites in Cornwall, for example, are a hit with surfers.

Profits for the year came in at £8.9m - ahead of analysts' forecasts. Stripping out the impact of acquisitions, profits were up just over 14 per cent.

Current trading is strong, with advance like-for-like holiday sales up 10.2 per cent. That is a good sign, given that last year 72 per cent of its peak capacity was booked by the end of April.

Without acquisitions, Parkdean reckons it can grow 5-6 per cent a year. It gets income from a variety of sources including selling caravans and pitches as well as from holidays and on-park facilities.

The real excitement, though, seems to be acquisitive growth which will be financed out of existing debt facilities. Parkdean estimates it has just 3 per cent of the UK market so there are clear opportunities for expansion. It plans to snap up other parks and, possibly, other businesses.

But the company also seems defensive. More than half its bookings came from repeat business last year. It is also maximising earning potential by lengthening the holiday park season.

The company's broker has raised its profit estimates for both this year and next. It is now looking for a profit of about £8.9m this year, translating to earnings of 15.1p.

That puts the stock - which closed up 5 per cent at 204.5p last night - on a multiple of 13.5 times. Given the growth prospects, that seems too low. Buy.