* Q3 retail revenue 528 mln stg, up 14 pct
* Comparable sales up 12 pct
* Says exchange rates "a significant headwind" in H2
* All other guidance maintained
* Shares rise up to 7.1 pct
(Adds CFO comments, details, background, updates shares)
By James Davey
LONDON, Jan 15 Demand for coats and large
leather bags helped Burberry top Christmas sales
forecasts, though the British luxury brand said its incoming
chief executive might have to cope with a hit to profit from a
stronger sterling in the months ahead.
Shares in the 158-year-old firm known for its camel, red and
black check pattern rose up to 7.1 percent on Wednesday, as
investors welcomed the strong sales in an industry jittery about
volatile demand in China - until recently its engine of growth.
"We believe many markets are still under-penetrated for the
brand," HSBC analysts said of Burberry's prospects.
The jury is out on whether sales growth in the luxury goods
industry this year will match, drop or slightly outpace the 10
percent rise recorded last year at constant currencies.
Analysts at Bank of America Merrill Lynch and HSBC are
forecasting a slight slowdown to 9 percent while others are
expecting growth of 11 percent. Much will depend on China, where
slowing economic growth and a government crackdown on
conspicuous consumption have cooled demand in recent quarters.
Finance chief Carol Fairweather told reporters comparable
store sales in Hong Kong, Macao were up by a "double-digit"
percentage and had just returned to double-digit levels in
mainland China during the period under review.
She said sales may have got a boost from local consumers
buying in advance of the Chinese New Year, the timing of which
played in favour of Burberry's reporting period this year.
"We are pleased with our performance in China but there is
no real change in the trend," she told a conference call with
journalists later on Wednesday.
Burberry's comments on the subject are closely monitored
since it was one of the first major luxury brands to warn of a
slowdown in China back in September 2012, sending tremors
throughout the whole luxury industry.
At 1235 GMT, Burberry shares were up 4.6 percent at 1,537
pence, the biggest rise by a European blue-chip stock.
The stock has fallen 7 percent since Oct. 15 when Burberry
said Chief Executive Angela Ahrendts would step down in mid-2014
to take up a job at Apple.
She is due to hand over to long-term chief creative officer
Christopher Bailey later this year who will have a dual role,
although the firm named a chief design officer to assist him in
his creative functions.
Bailey faces significant challenges when he takes over,
including the planned integration of Japan into the group on
expiry of an apparel licence in 2015, as well as growing revenue
in fragrance and beauty after the firm began directly operating
that business last year.
"We're in the transition phase and it's going very well,"
Fairweather said, referring to the management changes.
Wednesday's share price gains came despite Burberry
highlighting the potential impact of the strengthening of
sterling, particularly against dollar-denominated currencies,
when it translates overseas profits back into sterling.
"If current rates persist we think that will adjust our
profits by about 5 million pounds ($8.2 million) through the
rest of the (2013-14) year," Fairweather said.
"That's a translation impact, the underlying business
remains strong," she said, adding that Burberry's guidance for
its retail, wholesale, beauty and licensing businesses remained
unchanged from that given in November.
Sterling has risen about 8 percent against the U.S. dollar
over the past six months. Fairweather said Burberry was not
planning on changing its foreign exchange strategy or hedge the
translation of its overseas profits.
Burberry said it had bought back franchises in Thailand, a
top destination for Chinese tourists, after similar moves in
China and in the Middle East in countries such as Saudi Arabia.
Burberry is one of many luxury brands, including Kering's
Gucci, which are buying back franchises in emerging
markets to better control image and marketing investments.
But Fairweather said Burberry planned to "remain on a
franchise basis" in Latin America.
Burberry said its retail revenues rose 14 percent to 528
million pounds in the three months to Dec. 31, the third quarter
of its fiscal year. That compared with analysts' average
forecast of 520 million pounds, 464 million in the same period
last year and first-half growth of 17 percent.
Comparable store sales rose 12 percent, compared with 13
percent in the first half, reflecting double-digit percentage
growth in Asia Pacific, and mid to high single-digit growth in
both the Americas and EMEIA (Europe, Middle East, India and
($1 = 0.6075 British pounds)
(Additional reporting by Astrid Wendlandt; Editing by Paul
Sandle and Mark Potter)