Burberry Group Plc (BRBY) reported fourth- quarter revenue that beat estimates as sales of its more expensive products compensated for weak shopper numbers, sending the shares up the most in more than six months.
Sales at the U.K.’s largest luxury-goods maker rose 11 percent to 503 million pounds ($772 million) in the three months ended March 31. Analysts predicted 485.1 million pounds, according to the average of 11 estimates compiled by Bloomberg. The Asia-Pacific region, particularly China and Hong Kong, led same-store sales growth in the second half of the year.
Burberry is expanding retail operations and increasing average prices to target demand for the most expensive luxury goods, which Bain & Co. estimates will grow faster than cheaper lines until at least 2014. The so-called aspirational luxury consumer is reining in spending as a result of the current economic climate, Burberry Chief Financial Officer Stacey Cartwright said today on a call with reporters.
“To continue to run at a double-digit growth rate in China and Hong Kong is a very good performance,” John Guy, an analyst at Berenberg Bank, said by phone, referring to Burberry’s 15 percent increase in second-half revenue in Asia, excluding currency fluctuations.
Burberry shares rose 4.3 percent to 1,320 pence at 12:10 p.m. after earlier surging as much as 7.7 percent, the steepest intraday gain since Oct. 11.
LVMH Moet Hennessy Louis Vuitton SA (MC) rattled luxury stocks yesterday after reporting the slowest growth in fashion and leather-goods revenue in more than three years, citing a drop in Japanese tourism and fewer store visitors in China. Prada SpA (1913) also reported figures that disappointed analysts, saying cold weather, the economic crisis in Europe and tension between North Korea and South Korea had hurt demand.
Burberry said today that it expects the global environment to remain challenging, adding that it hasn’t seen a marked change in the pattern of shopper numbers in the fourth quarter.
“The focus of all of our teams regionally is making the most of the footfall that there is, improving conversion and driving up that average selling price,” Cartwright said.
Quarterly sales gained 10 percent, excluding currency shifts. Six-month sales climbed 15 percent in the Asia-Pacific region, 7 percent in the Americas and 4 percent in Europe excluding currencies, Burberry said. Comparable store sales advanced 7 percent in the second half.
The maker of $2,795 trenchcoats plans to open about 25 so-called mainline stores and close 15 this fiscal year, while opening about 10 concessions and closing the same amount, it said. New outlets will be weighted toward China and Latin America and are expected to boost retail revenue by a low-to-mid single-digit percentage in the year through March 2014.
“The guidance should temper enthusiasm” about Burberry’s performance last quarter, Bethany Hocking, an analyst at Investec Securities, wrote in a note.
Excluding beauty, which Burberry began directly operating this month, underlying wholesale revenue will fall by about 10 percent in the six months through September, the company said. Wholesale clients planned more conservatively for the fall, and sales continue to be affected by account closures and Burberry’s halt to some entry-price products in North America, it said.
Pretax profit last year will probably be at the top end of analysts’ estimates of 400 million pounds to 416 million pounds, CFO Cartwright said. In the current year, earnings on that basis may be 450 million pounds to 480 million pounds, in line with most analysts’ predictions, she said.
Burberry forecast wholesale revenue from beauty of about 140 million pounds and incremental so-called retail/wholesale operating profit of about 25 million pounds in the year through March 2014. The guidance is “conservative,” Berenberg’s Guy said.
Licensing revenue will be little changed in the full year on a reported basis, affected by hedging the Japanese yen.