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Demand From China Boosts Burberry

By Sam Robson - Apr 17, 2013 at 3:05PM

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Burberry releases a trading update for the second half.

LONDON -- Shares in Burberry (BRBY -0.53%) rose 1.8% to close at 1,289 pence today following the announcement of its operational highlights for the six months to March 31.

The high-end fashion retailer revealed that total revenue was up 9% on an underlying basis to 1.12 billion pounds, helped by a headline figure of 840 million pounds 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. 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 it 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 220 million pounds to account for only 20% of group revenue. Excluding the beauty division, Burberry 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 and a Knightsbridge store dedicated to menswear. It also closed two, bringing the total to 206 at the year-end -- a net increase of 14 for 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 following news that longtime CFO Stacey Cartwright was leaving the company and China's growth was slowing. However, today's rally should reignite interest in this popular growth stock. As always, though, if you're looking to invest, then use this information as a starting point and be sure to do your own research.

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