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Apr 20, 2010
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Burberry profit to top hopes

By
Reuters
Published
Apr 20, 2010

By James Davey

LONDON (Reuters) - Luxury goods group Burberry (BRBY.L) added to evidence the wealthy are spending freely again, forecasting 2009/10 profit "slightly" above market expectations and further progress in 2010/11.

Burberry


"While the pace and level of the global economic recovery remain unclear, we remain confident that our strategies will continue to build momentum in the business," Chief Executive Angela Ahrendts said on Tuesday 20 April.

She said the 154-year-old maker of upmarket raincoats and handbags plans to drive growth by investing in new regions, such as Brazil and India, as well as new initiatives and digital commerce.

Prior to the update, analysts were forecasting a consensus underlying pretax profit of 199 million pounds for the year to March 31, 2010, according to a company poll, versus 175 million pounds in the previous year.

Burberry, best known for its camel, red and black check, said underlying revenue increased 6 percent to 707 million pounds in the six months to March 31.

That compared with analysts' consensus forecast of a rise of 5 percent, a third-quarter increase of 12 percent and a first-half decline of 5 percent.

Chief Financial Officer Stacey Cartwright said the outcome reflected particularly robust retail demand for outerwear and non-apparel, such as handbags, small leather goods, shoes and soft accessories.

She told reporters sales of Burberry's top-end products, such as its Prorsum range, had recovered well.

"That was a little softer this time last year and that's recovered very nicely," she said.

"By region Hong Kong, the UK and the UAE were the standout performers," she added.

Shares in Burberry, which have more than doubled over the last year, were down 0.2 percent at 700 pence at 10:59 a.m., valuing the business at 3.06 billion pounds.

"We remain of the view that upgrades are needed to justify a continuation of the positive momentum and the extent of these will be key," said Evolution Securities analyst Dennis Weber.

Luxury goods firms have been hit hard by the recession but Burberry has coped better than most because it reacted quickly by slashing costs and jobs as well as its stocks and ranges.

Evidence is growing that discretionary spending is back.

Last week LVMH (LVMH.PA), the world's biggest luxury goods group, beat forecasts for first-quarter sales, helped by a strong rebound in the U.S. and Europe, while a study forecast growth in global luxury sales of over 4 percent in 2010.

Burberry's second-half retail sales increased an underlying 15 percent, while wholesale revenue fell a better-than-expected 6 percent. Underlying licensing revenue was also down 6 percent, consistent with guidance.

For the 2010/11 year the firm expects to increase average retail selling space by around 10 percent. It forecast first-half wholesale revenue up "high teens percent" excluding Spain, and full-year licensing revenue down an underlying 5-10 percent.

(Editing by Louise Heavens and Rupert Winchester)

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