Burberry profit to top hopes as rich spend again

Burberry profit to top hopes as rich spend again

London: British luxury goods group Burberry added to evidence the wealthy are spending again, forecasting 2009-10 profit slightly above market expectations after a stronger than anticipated finish to the year.

The 154-year-old maker of upmarket raincoats and handbags also said on 20 April it was confident of further progress in 2010-11 despite uncertainty over the pace and level of the global economic recovery.

Prior to the update, analysts were forecasting a consensus underlying pretax profit of 199 million pounds ($319 million) for the year to 31 March 2010, according to a company poll, versus 175 million pounds in the previous year.

The group, known for its camel, red and black check, said underlying revenue increased 6% to 707 million pounds in the six months to 31 March.

That compared with analysts’ consensus forecast of a rise of 5%, a third-quarter increase of 12% and a first-half decline of 5%.

Second-half retail sales increased an underlying 15%, driven by strong full-price sales of spring and summer ranges.

Underlying wholesale revenue fell a better-than-expected 6%, while underlying licensing revenue was also down 6%, in line with guidance.

Shares in Burberry, which have more than doubled over the last year, closed at 704.5 pence on 19 April, valuing the business at 3.06 billion pounds.

Luxury goods firms have been hit hard by the recession but Burberry has coped better than most because it reacted quickly by slashing costs and jobs as well as its stocks and ranges.

Evidence is growing that discretionary spending has returned.

Last week LVMH, the world’s biggest luxury goods group, beat forecasts for first-quarter sales, helped by a strong rebound in the US and Europe, while a study forecast growth in global luxury sales of over 4% in 2010.

Burberry also gave guidance for the 2010-11 year. It expects an increase in average retail selling space of around 10%, first-half wholesale revenue up “high teens percent" excluding Spain, and full-year licensing revenue down an underlying 5-10%.