Burberry sets sights on Chinese wealth with expansion plan
Thursday 14 October 2010
Burberry, the quintessentially British clothing brand, is targeting the growing wealth in China with a plan to double the number of its stores across the country.
This came as the group unveiled a 17 per cent rise in first-half profits yesterday. Its chief executive Angela Ahrendts hailed Burberry's momentum, and said the full-year numbers would hit the top end of market expectations.
The brand, which is sported by celebrities such as Sarah Jessica Parker and Jessica Alba, announced that total revenues rose from £527m in the six months to the end of September 2009 to £641m a year later.
The biggest growth was in the Asia Pacific region. The group, which was founded by tailor's apprentice Thomas Burberry in 1856, is especially focused on China, where it bought out its local franchise partner at the beginning of last month. This will allow the group to take complete control of the 50 stores it has there, spread across 30 cities.
Stacey Cartwright, the chief financial officer, said: "We believe we can drive more productivity with those stores," adding Burberry was looking to double the number of shops in the country. She said the country would be a "double-digit growth driver".
Ms Ahrendts plans to increase group selling space by 25 per cent by the end of the financial year. About 15 per cent of that expansion is planned for China.
Underlying revenues at the company's stores rose 20 per cent from £294m in the six months to the end of September 2009 to £366m this year.
Its Aviator jackets, which cost about £2,000 each, proved particularly popular as did its series of shearling boots. The group also had success with its April Showers Capsule Collection, which included everything from trench coats and wellington boots to umbrellas and iPod cases.
Dennis Weber, an analyst at Evolution Securities, said the revenue statement outstripped his expectations, adding that Burberry had been the "best performing stock in the luxury space over the last two years".
Ms Cartwright said the luxury sector was be "holding up well" despite the recent squeeze on general consumer spending. Beyond Asia, Russia and the Middle East have seen soaring sales, as well as France and Italy.
The parent of Moët Hennessy and Louis Vuitton said in August it expected double-digit growth for its watch and jewellery operations in China. The group entered the country in 1992, and plans to expand to enter two new cities a year.
Like Burberry, another classic British clothing and accessories brand, which has been well received in China. It now owns 42 stores across 14 cities, with a further 48 franchise stores.
The luxury hotel chain has been operating in China since 1998. It was, however, hit by the downturn as Chinese corporate clients were not enough to make up fall in overseas corporate travellers.
Cartier's parent has opened in Beijing and Shanghai, and believes China "will be tomorrow's market; our prime importance is therefore to make sure we are established in China today". The country made up 22 per cent of group sales in the year to 31 March.
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