Chinese shoppers fuel surge in Burberry sales

By James Thompson
Wednesday 19 January 2011 01:00

Burberry, the luxury fashion brand, has boasted that its annual profits will be at the top end of expectations after China helped it deliver a barnstorming performance in Asia.

The group, which has six standalone UK stores, as well as a handful of concessions in Selfridges, Harrods and Harvey Nichols, posted a 27 per cent leap in total revenues to £480m for the three months to 31 December.

Angela Ahrendts, the chief executive of Burberry, said its revenue growth was driven by "strong, consistent growth in both retail and wholesales and in every product division and region". Its buoyant update follows that by Richemont, the world's largest jewellery maker, which on Monday said its third-quarter sales jumped by 33 per cent.

Burberry now expects adjusted pre-tax profits for this financial year to come in at the top end of City forecasts of between £254m and £291m. The trading update lit up Burberry shares – one of the strongest performers on the FTSE 100 last year – which closed up by 56p to 1115p yesterday.

Burberry's strongest revenue growth of 68 per cent to £150m came in Asia Pacific, boosted by China where the fashion brand acquired 50 franchise stores last September. Stacey Cartwright, the finance director of Burberry, said: "The underlying market in China is doing very well." But she said Burberry had helped itself with improvements, such as adding more product inventory into the recently acquired stores. Like-for-like sales at these Chinese shops soared by more than 30 per cent. Excluding these outlets in China, Burberry grew underlying sales by 14 per cent globally.

Ms Cartwright said that the UK was "one of the strongest performing" markets, lifted by continuing growth of overseas visitors to London, where most of its shops and concessions are located. "It was very much driven by the luxury customers coming in from abroad," she said. While the Chinese were the biggest spenders in its UK shops, they were closely followed by visitors from Russia, the Middle East and Continental Europe.

Globally, Burberry said it had benefited from strong demand across its product range including Prorsum trench coats, shoes, small leather goods and men's accessories. In menswear, it cited strong demand for "man bags", which sell for between £295 and £895.

Retail sales surged by 40 per cent to £335m over the quarter, while wholesale revenues rose by 15 per cent to £112m. Excluding China, which transferred to retail following the store acquisitions, wholesales revenues jumped by 35 per cent.

In the second half, Burberry plans to keep up with its expansion plans, adding 25 per cent of new space in the period. Of this, about 15 per cent will come in China. Andy Wade, an analyst at Numis Securities, said: "We expect the ongoing roll-out to underpin Burberry's growth trajectory."

Licensing revenues, the smallest part of Burberry's operation, fell by 11 per cent to £23m, hit by the impact of planned terminations of licences in menswear and Japanese non-apparel.

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