October 12, 2011 / 6:26 AM / in 6 years

UPDATE 3-Burberry sees no sign of slowdown for luxury spending

* Q2 revenue 463 mln pounds, vs forecast 448 mln

* Comparable store sales growth accelerates to 16 pct

* Comparable store sales in China remain about 30 pct

* Ready to adjust if sees significant slowdown in demand

* Shares up 1.6 percent, broader British market lower

By Mark Potter

LONDON, Oct 12 (Reuters) - British luxury goods group Burberry is not seeing a slowdown in demand for its trademark raincoats and leather goods despite an uncertain economic outlook, it said on Wednesday as it beat quarterly sales forecasts.

“No evidence of any slowdown ... What we have seen is consistent strong brand momentum and business growth,” Finance Director Stacey Cartwright told reporters after the 155-year-old group posted a 29 percent rise in second-quarter revenue.

Burberry, best known for its camel, red and black check textile pattern, said it would press ahead with its expansion plans, while adding it was ready to adjust should signs of a big drop in spending emerge.

Luxury goods stocks have fallen sharply in recent weeks on signs of an economic slowdown in China -- the engine of recent strong growth in demand for luxury goods -- and fears the euro zone debt crisis could tip the world back into recession.

While applauding Burberry’s performance, some analysts remained concerned.

“There is limited visibility at this stage on the outlook for the critical Christmas season,” Citi analysts said.

“It is too early for luxury demand to be materially affected by recent equity market dislocation and deterioration in economic conditions.”

At 0800 GMT Burberry shares were up 1.7 percent at 1,285 pence, reversing early losses but still well below July’s record high of 1,610 pence.

Revenues for the three months ended September, Burberry’s second quarter, reached 463 million pounds ($723 million), in line with the 30 percent growth achieved in the first quarter and above a forecast for 448 million in a Reuters poll.


Demand was driven by new store openings and by tourists from around the world, including China, Brazil, Russia, India and Saudi Arabia. Spending by travellers could account for over half of revenues at stores in major cities like New York, London, Paris, Hong Kong and Dubai, Cartwright said.

Customers scooped up the group’s trademark trenchcoats, which can cost anything from a few hundred pounds to around 12,000 pounds, while accessories like the new Burberry Body perfume also sold well, she added.

Comparable store sales growth accelerated to 16 percent in the second quarter from 15 percent in the first, with sales in China remaining at around 30 percent.

Burberry said the first-half operating margin in its retail and wholesale businesses would be broadly flat, compared with a previous forecast for a small decline.

But this was partly due to a rephasing of investment and costs and the company kept full-year guidance for a “modest improvement” in the margin.

Cartwright said she did not expect any change in analysts’ consensus full-year profit forecast -- which stands at around 370 million pounds according to Thomson Reuters I/B/E/S Estimates.

Burberry plans to increase average retail selling space by about 15 percent in the second half, including stores in Paris, China and Latin America.

It expects wholesale revenue to rise by a mid single-digit percentage at constant exchange rates in the second half, down from 9 percent in the first half, due to tougher comparative figures and a shift to more retail sales.

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