Taste for the very best lifts Burberry results

BURBERRY calmed fears about slowing demand in China with better-than-expected fourth quarter results as it sold more of its most expensive items.

The luxury group, which makes its iconic heritage trenchcoat in Yorkshire, said demand from affluent Asian customers for its more expensive handbags and coats helped boost sales.

It said “aspirational” shoppers were spending less, but its most affluent customers were spending more and its staff were helping to push more expensive items.

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Total group revenue for the six months to March 31 was £1.116bn, ahead of a company-compiled average analyst forecast of £1.098bn.

Burberry is reducing its Europe focused wholesale business to focus on tapping appetite for Western luxury in faster growing Asian and Latin American markets.

It has been repositioning its brand at the higher end of the luxury market.

“Overall, this is a strong performance,” said Cantor Fitzgerald analyst Allegra Perry. “While trading remains uneven, Burberry has regained strong momentum in critical Asian growth markets.”

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Last September, Burberry shook the global luxury industry by warning of a spending slowdown, particularly in China – the driving force behind demand in recent years – but it has been more upbeat on prospects there recently.

Fourth quarter group sales rose 10 per cent to £503m, beating Ms Perry’s forecast of £489m and following a better-than-expected third quarter result. Retail sales, which make up 75 per cent of revenue, grew 14 per cent to £376m in the period.

Comparable store sales in the quarter grew by 8 per cent, with double digit rises in China and Hong Kong.

Shares in Burberry, whose spring/summer campaign is being modelled by Cara Delevingne and David Beckham’s son, Romeo, rose 8 per cent during trading, taking it towards the top of the FTSE 100 risers. Shares closed last night at XXX

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Burberry said it would slow its store openings in 2013/14 after above average growth in the last two years.

It said it would open a net 10 Burberry stores in the year, with three larger format stores opening in Shanghai to serve local customers and Chinese domestic tourists. It expects the new stores to deliver a low to mid-single digit percentage increase in retail sales.

In Europe, where consumer spending has been hit hard in a downturn, second half sales rose four per cent to £288m, compared to a 15 per cent rise in Asia Pacific.

This week the owner of Louis Vuitton LVMH posted the lowest quarterly sales growth since 2009 at its fashion and leather division, while Italian fashion house Prada has outlined plans to expand in the Middle East and the Americas to help offset lower spending in Europe.

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In a survey this month, more than half of 23 brands at stores in London, Paris and Milan – including Gucci, Hermes and Jimmy Choo – also reported lower demand from tourists, notably from Asia.

Burberry, however, said tourist levels in the region had been fairly stable.

At its wholesale business, lower demand and account closures in Europe, Burberry’s largest region, saw revenue fall in the second half.

The firm said it expects underlying wholesale revenue to fall by 10 per cent in the six months to September 30.

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Angela Ahrendts, chief executive, said the group will continue to invest in its operations in Yorkshire. Burberry makes trenchcoats at a red-brick factory in Castleford employing 600 people. It also has a factory at Keighley, where it prints and weaves many of its fabrics.

Ms Ahrendts has said that as long as the global luxury sector remains robust, headcount across Burberry’s Yorkshire operations would continue to increase.