Burberry Shares Back in Fashion
**Burberry Shares Enjoy Rebound **
After putting out a profit warning last month, Burberry Group (LON:BRBY) have fallen out of fashion with some investors. Yet the shares in the British luxury goods retailer seem to be once again in vogue with traders as the FTSE 100 company revealed that its recent sales slowdown had not affected its highest-spending customers, The Times reported on 10 October 2012.
On Thursday, the FTSE 100 Index rose 22.53 points, or 0.4 per cent, to 5,799.24, halting a three-day sell-off. Burberry shot to the top of the blue chip risers’ board with a 10 per cent surge, or 101 pence, to £11.04. Although still well below the £13.75 at which they traded in early September, the recent rise is seen as soothing after the profit alert, issued in September, drove Burberry’s stock lower by more than a fifth in a single session and unnerved sentiment towards the wider luxury goods sector.
**High-Spenders Remain Despite Economic Uncertainty**
Investors’ worries over the health of Burberry eased and even turned into positive sentiment after the brand reported a total sales growth of 8 per cent to £883 million in the first half of the year. Due to the recent global economic uncertainty last year’s first-half record growth of 30 per cent could not be sustained, but the slowdown was not as harsh as some analysts feared. The luxury retailer said that sales are down in the UK and in China, which had previously been a lucrative growth market, but these slowdowns were offset by ‘robust’ performances from stores in regions such as Hong Kong, France and Germany. The resilience of the big spenders also contributed to the company’s growth, with the higher average transaction price offsetting the fact that fewer customers are coming into the luxury brand stores.
!m[British Luxury Brand’s Shares Up 10% as Sales Growth Brings Relief](/uploads/story/562/thumbs/pic1_inline.png)Burberry chief executive Angela Ahrendts said: “Against record prior year comparatives, Burberry delivered 8 per cent total revenue growth and 10 per cent retail growth in the first half, albeit slowing in the second quarter. In a more challenging external environment, footfall declined but brand momentum remained strong, particularly with our higher spending luxury consumer.”
**The Outlook Remains Challenging**
Despite the recent sales growth and shares rebound, Burberry remained cautious on whether the more buoyant trading would continue for the rest of the year. The company’s chief financial officer, Stacey Cartwright said: “It remains challenging. Whichever market you look at, they each have their specific factors — whether its distractions with elections, changing of the guard in China, there’s a lot of macro concern still out there.”
In an effort to assure long-term growth, Burberry announced its plans to expand its presence in London despite its low second-quarter trading figures. According to the company, sales in the UK capital had been affected by the Olympic Games, but in the run-up to the Festive season, the brand’s business in London will recover.
Ms Cartwright said: “We are actually very excited about London. We just opened our Regent Street flagship store and we’re more than delighted with how that’s started trading. We’re opening our first menswear stores in Knightsbridge as well. So our presence in London is going to be even more accentuated this third quarter.”
The luxury retailer also confirmed plans to terminate its fragrance licence with Interparfums (EPA:ITP) and take its perfume business in-house instead. Commenting on the decision, CEO Ahrendts said: “Directly operating fragrance and beauty is in line with our strategy of taking greater control over our brand.”