Demand From China Boosts Burberry Group Plc

The Motley Fool

Shares in Burberry (LSE: BRBY) rose over 5% in early trade this morning, reaching 1,335p at the time of writing, following the announcement of its operational highlights for the six months to 31 March 2013.

The high-end fashion retailer revealed that total revenue was up 9% on an underlying basis, to £1.12bn, helped by a headline figure of £840m from retail revenue, which itself was up 13% on an underlying basis. As expected, retail's growth was led by operations in Asia Pacific, especially Greater China.

Across the board, all four product divisions saw double-digit growth, while outerwear, menswear and digital all outperformed and comparable store sales increased 7% year on year. This division now accounts for three quarters of group revenue, so investors will be pleased to see this area performing well.

As part of management guidance, Burberry has been decreasing its reliance on wholesale, which saw revenue down 3% on an underlying basis to £220m, and now only accounts for 20% of group revenue. Excluding Beauty, it now expects underlying wholesale revenue to decrease by about 10% in the next six months.

In the second half, Burberry opened 10 new stores, including a Chicago flagship store as well as a Knightsbridge store dedicated to menswear, and closed two, bringing the total to 206 at the year end -- a net increase of 14 in the year.

Chief executive officer Angela Ahrendts commented:

"With three-quarters of our revenue now generated in retail, we are pleased with the 13% growth in this channel in the second half, driven by continued innovation in product, marketing and customer service, especially over Christmas and Chinese New Year.

"Looking forward, while we expect the external global environment to remain challenging, the team is intensely focused on optimising the significant opportunities that exist for the brand across geographies and product divisions, with particular emphasis on unlocking the potential of our digital platform and our newly-integrated fragrance and beauty business."

Burberry's shares saw a mini-slump earlier in the year, off the back of the news that long-time CFO Stacey Cartwright was leaving the company and fears of a China slowdown, which saw their value drop to as low as 1,247p. However, today's rally should reignite interest in this popular growth stock -- as always, though, if you're looking in invest then use this information as a starting point and be sure to do your own research.

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