Demand in Asia boosts Burberry
Burberry shrugged off worries that slowing Chinese growth will stifle demand for its handbags and trench coats today as it reported better-than-expected sales at its stores.
The luxury goods group's core retail arm posted like-for-like sales growth of 7% in the six months to the end of March, compared with City forecasts for 2 to 3% growth.
Worries over waning demand for luxury goods were heightened by a profits warning last month from handbag maker Mulberry, which reported a post-Christmas slowdown. Burberry - famous for its red, black and camel check - itself spooked investors by warning over profits last September.
China this week shook global markets by reporting quarterly economic growth of 7.7%, below the 8% expected by economists.
That prompted fears of a "hard landing" for the world's second-biggest economy, which has a growing appetite for luxury goods.
But 13% growth in retail sales to £840m (€981.8m) during the six months boosted Burberry's shares by as much as 8% at one stage.
Leather handbags, men's accessories and tailoring all sold well. The company added that footfall remained "soft", but it boosted takings with higher prices.
Growth was driven by Asia and China in particular, as Burberry focused its sales efforts on the Chinese new year in early February, as well as Christmas.
Burberry said European underlying sales were flat, sales in the United States rose slightly, but Korea and Italy remained "weak".
Hargreaves Lansdown analyst Keith Bowman said: "Burberry has again pleased, making earlier challenges look temporary in nature.
"Nonetheless, with the company's Asian bias increasing and the debate over Chinese economic growth still ongoing, room for caution appears to persist."
The 7% sales growth at stores open for more than a year compares with 12% growth during the same period a year earlier.
Burberry plans to open a net 10 stores and 10 concessions over the next year, focused on China and Latin America.
Total revenues including new space were up 9% to £1.12bn (€1.3bn) during the six months.
Burberry was founded in 1856 and has 206 stores, 214 concessions, 49 outlets and 65 franchises.
