Burberry enjoys a sales rise
Luxury goods brand's transformation has been a success as its profit forecasts are marked up by analysts
guardian.co.uk, Wednesday 14 October 2009 19.00 BST Julia Finch
Three weeks after Burberry's triumphant return to London Fashion Week, the luxury goods label has unveiled a recession-defying trading update. The designer label, which pulled in celebrity names including Victoria Beckham, Twiggy, Gwyneth Paltrow and Samantha Cameron to its London catwalk show and party in September, posted much better-than-expected second quarter sales of £343m, some 5% higher than the same period last year.
The shares, which are now in the FTSE 100 and have doubled this year, rose 28.5p to close at 565.5p as analysts marked up their full-year profit forecasts. Stacey Cartwright, the Burberry finance director, suggested that the "upper end" of the City's £160m-£190m range was most likely.
Most luxury goods firms have been hit by the recession, but Burberry took swift action to cut costs and jobs. The 150-year-old brand, which is known for its trademark beige plaid and trenchcoats, has been resurrected as a high fashion label. It has also been boosted by new Asian stores and weak sterling.
The sales improvement has been boosted by Burberry's handbags, such as its totes, which range from a small nylon version for £150 to a large black alligator tote, trimmed with a barbed wire chain, for £12,250. Snoods – pull-on scarf-cum-hoods which Burberry is selling for £150-£195 – have also been big sellers.
Retail sales, which account for more than 50% of group sales, were up 14% in the first half – or 27% taking into account the boost from the pound/dollar exchange rate – with most growth coming from new store space and the buoyant Middle East market. Nine new stores have been opened in the last six months, including new outlets in Singapore and Tokyo. Six stores were closed. Europe and Asia, led by Britain and South Korea, remain the best-performing markets with the US and Spain – traditionally a big market for the brand – recording large falls.
Wholesale sales were down an underlying 23% as customers cut back their orders to reduce stocks. Nearly half the decline, however, was the result of Burberry's own actions, such as shutting down the younger Thomas Burberry brand and changing Middle East outlets from wholesale to retail. Nine new franchised stores opened, including seven in China. Burberry now has 44 outlets in China, including a specialist children's store in Beijing.
Could the rise in sales be due to allowing the participation of potential customers to view the show online? By getting a sneak peak at what's on offer, then finding out that you can get one of those bags for £150, it must have boosted sales. By making Burberry more of an available brand, having kid's and now adult's favourite Emma Watson as the head of their campaigns, and bringing back the Burberry print (but not on a cap or scarf) has increased their popularity, as well as careful business decisions to disable Thomas Burberry and changing wholesale stores in the Middle East to retail, are all causes for an increase in sales. Let's just hope they continue to show in the UK and don't move to New York or Paris. After all, it's a traditionally British brand and so should stay that way.