China helps to drive growth as Burberry to add more store space

The 155-year-old maker of raincoats and handbags reported a 32 per cent surge in revenues to £390m in the three months to March, which it said would result in full-year profits being at the top end of expectations. Burberry, best known for its camel, red and black check, said it would increase store space by 12 per cent to 13 per cent in average retail selling space in the financial year to March 2012, mainly in China, Latin America and the Middle East.

The retailer warned licensing revenues in Japan, where a licensed dealer sells Burberry goods to about 800 outlets, would be broadly flat throughout the year.

Burberry and the luxury sector has experienced a more rapid recovery than the rest of the retail sector, driven by demand from Chinese shoppers and tourists.

Angela Ahrendts, Burberry chief executive, said: “Burberry had a strong finish to the year, driven by our design, digital marketing and retail initiatives, as well as good early progress in China.”

She added: “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.”

The group said retail revenues were up 42 per cent to £596m in the six months to March, while wholesale revenues gained 14 per cent to £214m in the same period.

The fashion house said retail growth was driven by its new stores in China, but all regions experienced double-digit growth. It said its Burberry Prorsum and Burberry London brands outperformed.

The company opened seven stores in the final six months of the year, in New York, Milan, Beijing and Shenzhen in China, Delhi, Sao Paulo and Puebla in Mexico.

Burberry makes its iconic trench coats in Castleford and has another factory in Keighley.

Wholesale revenues were similarly driven by a surge in sales in China, but the Americas and Asia Pacific also outperformed, Burberry said.

The company’s licensing division saw revenues decline 5 per cent to £50m, but this was in line with expectations, as growth was offset by the planned termination of the Japanese leather goods licence in 2010.

Shares in the FTSE 100-listed company gained nearly 8 per cent after yesterday’s update. They finished up 69p at 1215p.

Katharine Wynne, an analyst at brokers Investec, said Burberry’s expectations of full-year profits to March 2011 at the top end of expectations implies a figure of £290m.

Ms Wynne added there was also scope to revise upwards its forecast for the year to March 2012.