Fashion and luxury goods peddler Burberry Group plc (LON:BRBY) saw retail revenues in its first quarter rise far faster than the market had been expecting.
Retail revenue advanced 21 percent to 339 million pounds ($504.7 million) in the three months through June, London-based Burberry said today. Analysts predicted 316 million pounds according to the median of nine estimates compiled by Bloomberg News. Comparable-store sales increased 13 percent, exceeding the 5 percent analysts had anticipated. The company may have expected that sort of eye-catching performance but the Citi had not; UBS, for example, had predicted retail sales of £321 million and a mere 6 percent increase in LFL sales.
Same-store sales advanced at least 10 percent in the Americas and the Asia Pacific region, led by Hong Kong and China, Burberry said. Same-store sales in Europe, the Middle East, India and Africa posted high single-digit growth, the company said. France and Germany remained “robust,” while Korea showed “early signs of improvement‘‘, Burberry said.
Burberry is widening its retail distribution
Burberry Group plc (LON:BRBY) is widening its retail distribution and expanding its offer beyond apparel to target demand for its brand in buoyant economies such as Asia. The maker of $2,795 raincoats, which began operating its own fragrance and beauty division in April, expects new stores to boost retail revenue by a low-to-mid single-digit percentage in fiscal 2014, it said today repeating an earlier forecast.
“The group has executed well on its strategy,” said Allegra Perry, a London-based analyst at Cantor Fitzgerald. She recommends holding Burberry shares. Allegra believes there is a significant margin opportunity given the gap to its larger luxury peers and see this as a longer-term story.
Projecting higher operating margin
Burberry Group plc (LON:BRBY)’s aim this year is to widen “modestly” the operating margin from last year’s 17.1 percent. LVMH Moet Hennessy Louis Vuitton SA (MC), the world’s largest luxury goods company, last year posted an operating margin of 21 percent. Burberry still expects adjusted profit before tax for the six months through September to be below last year’s 173 million pounds, it said.
Customer traffic increased strongly online
Outerwear and large leather goods accounted for more than half the growth, according to Burberry Group plc (LON:BRBY). Men’s accessories and tailoring outperformed, and the trenchcoat maker sold more of its higher-priced Prorsum and London lines as a percentage of sales, it said. Customer traffic increased strongly online, while visits to the stores were “soft,” Burberry said.
“Spring/summer 2013 was a standout season,” Burberry Chief Executive Officer Angela Ahrendts said in the statement. “The macro outlook remains uncertain and we will continue to focus our investment on profitable high-growth opportunities by channel, region and product categories.”