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Burberry targets Japan for growth

Wednesday, May 21, 2014 - 02:01

May 21 - Burberry's profits have increased 30% in a year while luxury rivals have struggled. Their latest results continue the trend and Japan is now their new focus. Joanna Partridge looks at their business strategy?

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A man with expectation resting on his shoulders. Christopher Bailey's now Chief Creative and Chief Executive Officer of Burberry. In the first results announced since he took the helm, the British luxury brand unveiled an 8% rise in annual profits, in line with expectations. Bailey officially took over as CEO on May 1 from Angela Ahrendts, who left to join Apple. The firm has also raised its full year dividend and said it believes it can grow sustainably in future. But it said it could suffer from foreign exchange movements as it translates profit into sterling. Burberry's long focussed on China, now it's targetting Japan, the world's second largest luxury market with its trench coats, fashion and accessories. It wants to quadruple its revenue in Japan by 2017. That could be a good move, says Michael Hewson from CMC Markets, at a time when reports show sales of luxury goods are slowing, especially in China, Russia and Europe. SOUNDBITE: Michael Hewson, CMC Markets, saying (English): "We saw a very good GDP number out of Japan earlier this month, I think a lot of that was driven by the fact that a lot of Japanese consumers were front-running that rise in the sales tax. But also I think Burberry have embraced the digital world an awful lot better than say companies like Mulberry have. They've got boutiques in Amazon, so you can buy Burberry products directly from Amazon, they've also opened a digital boutique in China as well." Investors seemed to like the strategy. Despite some initial concerns about Bailey's dual role, Burberry shares have risen 2% over the past six months. That run may continue says Patrick Armstrong from Armstrong Investment Management. SOUNDBITE: Patrick Armstrong, Armstrong Investment Management, saying (English): "I think any company that's got a very strong brand, that has a price setter and exposure to Asia, I think those stocks are going to continue to do well." Burberry has been taking back control of important parts of the business from licensed vendors. Expiring third-party sales licenses in Japan give it free rein as it expands there.

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Burberry targets Japan for growth

Wednesday, May 21, 2014 - 02:01