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Burberry forecasts profits at top end of expectations as sales soar

Burberry, the luxury British brand, said it expected full year pre-tax profits to be at the top end of market expectations as sales surged 33% in its fourth quarter.

Total underlying sales at the brand for the fourth quarter to March 31 grew by 33% to £390m. Retail sales grew by 48% to £261m during the period, with wholesale revenues rising 14% to £102m.

Total revenue for the six months to March 31 grew 30% to £860m, with European sales seeing an underlying growth of 16% to £254m.

Retail sales soar

Underlying retail revenues in the second half grew by 42% to £596m, with like-for-like sales increasing by 13%.

Wholesale revenues rose 14% during the period to £214m due to better than expected in season orders and strong growth from menswear. The brand has been rationalising its wholesale accounts in Europe over the last couple of years.

Prorsum drives selling prices

Burberry said it had been “delighted” with the growth of Burberry Prorsum and Burberry London catwalk brands. During the six months Burberry’s average selling price increased, driven by greater penetration of Prorsum and Burberry London in apparel and continued outperformance from outerwear.

Chief financial officer Stacey Cartwright said non-apparel represented 40% of sales, driven by a strong performance from scarves, men’s large leather goods and footwear.

Japan

Burberry was impacted by the tsunami and earthquake in Japan in March as its stocks fell shortly after the disaster. However, Cartwright said the first priority had been the welfare of teams and partners in Japan. She added that she expected Burberry’s licensing business in Japan to deliver flat revenues year-on-year.

Burberry has 14 shop-in-shops and two flagship stores in Japan, which make up less than 2% of the group’s overall revenues and were “severely impacted in the immediate aftermath” but have recovered since then, she added.

Outlook

Angela Ahrendts, chief executive officer, 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. As a result, we expect adjusted profit before tax for the financial year 2010/11 to be around the top end of market expectations.”

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.”

Burberry is set to increase its selling space by 12-13% in the next year and will look to build presence in Latin America and the Middle East. In the next six months to 30 September 2011, Burberry expects revenue from wholesale excluding China to increase by a mid teens percentage.

Drapers previously reported that Burberry had snapped up a couple of high profile London leases. Locations on London’s Regent Street and Brompton Road in Knightsbridge will see the brand create a “Burberry super flagship” department store format to showcase its entire product offer. Last week it opened its Burberry Brit store in Covent Garden.

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