Burberry Pushes into China as Half Year Sales Rise

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BurberryLondon—Burberry executives said today that the company will continue its push into China after the British luxury house posted a rise in second-quarter sales driven by growth in Asia and rising demand for coats and leathergoods.

“There is momentum in terms of strategy, sales and profit,”Stacey Cartwright, chief financial officer, said. The company reported 11% sales growth in its second quarter ended September 30, and a 17% increase in sales for the half year period.

Revenue rose to 382 million pounds (about $604 million) from 343 million pounds (about $543 million) in the same period in 2009. While the increases beat the 367.8 million pounds ($582.6 million) average estimate from market, growth was slower than the 27% sales increase in the first quarter.

Nonetheless, Angela Ahrendts, ceo, said Burberry expects full-year profit to be in the top half of market expectations. “Continued product innovation, digital and customer service initiatives, coupled with the recent acquisition of our Chinese retail operations, underpin our confidence in delivering long-term sustainable growth.”

China Expansion

Like many other luxurygoods brands, Burberry is looking toward Asia for its biggest growth. In July, the company bought out its franchise partner in China for $107.7 million.

China contributed 4% of this growth this year. Comparable store sales increased by 9% in the first half, with a second quarter rise of 8% slower than the 10% rise in the first quarter, but on tougher comparables. The company cited strong sales of outerwear and large leathergoods, as well as its Prorsum, shoes and children’s wear lines.

Replenishment, inventory and pricing strategies introduced during the second half of last year led to a material improvement in gross margin in this first half, the company said.

By region, Asia Pacific and Europe continued to deliver double-digit comparable store sales growth, with Hong Kong, the United Kingdom, Italy and France were among the best performing markets.

Wholesale revenue (excluding China) grew by 21% at constant exchange rates, slightly ahead of guidance. This largely reflects restocking by wholesale customers, following reduced demand in the same period last year. Asia Pacific, the Americas and emerging markets all showed above-average wholesale growth, while in Europe, the group’s largest wholesale region, sales were slightly ahead of last year.

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