Burberry shrugs off Sars to post strong sales

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The Independent Online

Burberry signalled yesterday that the recent Sars-inspired slump in the luxury goods market was over, posting a strong rise in first-half sales.

The group, famous for its plaid check designs and raincoats, beat City expectations to report double-digit growth across its retail, wholesale and licensing divisions.

"Life is clearly getting better but it does vary from market to market," Mike Metcalfe, the outgoing chief operating officer said. "Hong Kong, which was hurting quite badly in quarter one, is back to its pre-Sars level of trading although the UK and continental Europe are the slowest to recover."

The group's best performance came from the US, where it is expanding aggressively. The recent launch of its Brit fragrance was hailed by the US department store Bloomingdale's as its most popular perfume launch ever.

Burberry's optimism was echoed by LVMH, the luxury goods giant whose brands span the Louis Vuitton luggage label and Hennessy cognac. The French group glossed over an 8 per cent drop in sales for the first nine months of its year by stating that recovering US and Japanese markets would help it meet its full-year targets.

As part of its expansion drive, Burberry said it would open its first store in Russia early next spring. The 5,000 sq ft Moscow store, one of six slated to open in the second half, will be operated by a third party, in line with its store opening strategy in China, where it has 26 outlets.

Retail sales, Burberry's main growth driver as it seeks to diversify away from its trademark check, rose 20 per cent on an underlying basis, driven partly by two new stores in the US and one in Milan.

A number of City analysts raised their share price targets to reflect the strong numbers, although the shares lost 4.75p to 368p as investors sought to bank profits after a strong run. Analysts at Morgan Stanley said the Burberry brand was "still hot worldwide" with "considerably more growth potential, especially in the US".

The London-based group, which was partially floated by its parent GUS in June last year, is seeking to reposition its brand across its main markets to compete directly with rivals such as Gucci and LVMH. Its Prorsum fashion line shunned London for the Milanese catwalks last month, underlining its determination to take on the major fashion houses.

Mr Metcalfe, who is leaving next March to seek a chief executive post elsewhere in the sector, said the group's efforts to reposition the brand in Spain had paid off with the first rise in revenues from the country for "several seasons".

The group's wholesale sales were 14 per cent higher, while its underlying licensing revenues rose 15 per cent, driven by strong demand for its sunglasses, children's lines and fragrances. Total revenues rose by 17 per cent to £321m in the six months to the end of September. The group will post its interim results next month.

Separately, LVMH said like-for-like sales in its third quarter rose by 6 per cent on the back of a strong performance from luggage and fashion lines.