Burberry results ease market fears

UK fashion firm Burberry soothed fears about the luxury goods market today as it reported better-than-expected half-year figures.

The group – known for its red, black and camel check – posted a 6% increase in underlying pre-tax profits to £173m (€216m), thanks to high-spending luxury consumers offsetting a drop in footfall across its stores.

Burberry recently spooked investors after warning over profits in September amid concerns that China’s demand for its luxury goods was in decline.

The group confirmed that like-for-like sales growth slowed in China over the second quarter, but remained positive, giving it “mid-teens” growth over the six months to September 30.

However, Burberry’s decision to start making its own perfumes and cosmetics hit profits on a non-adjusted basis.

Bottom-line figures fell from £158.7m (€198.2m) to £111.9m (€139.75m) in the first half as it paid £74m (€92.4m) as part of a previously announced €181m charge to end a licence agreement with Interparfums.

Despite the initial financial blow, Burberry chief executive Angela Ahrendts said the decision to bring perfumes and beauty in-house was a “significant brand and business opportunity” and will boost profits over time.

It is creating a new division for perfumes and cosmetics, called Burberry Beauty.

Kate Calvert, retail analyst at Seymour Pierce, said: “This is a reassuring set of results and will help rebuild sentiment towards the shares after its unscheduled trading update in September.”

But she said the group’s performance over the all-important Christmas season would be key for its full-year performance.

Burberry lost 20% of its stock market value in one day after September’s profit alert, but more reassuring details on its underlying performance since then has helped shares recover, with the stock opening higher today.

Sales figures, which were already announced last month, showed underlying retail sales rising by 10% to £577m (€720.6m) in the first half as higher quality sales, such as its Prorsum range, offset a drop in customer numbers.

It said the UK, which accounts for 40% of European retail sales, saw a slowdown in London during the second quarter amid disruption from the Olympics.

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