July 11, 2012 / 6:41 AM / 7 years ago

UPDATE 2-China slowdown hits Burberry sales

* Q1 revenue up 11 pct vs forecast up 13 pct

* Q1 retail sales up 14 pct, wholesale up 9 pct

* Flags “more challenging external market”

* Shares down 6.3 pct

By James Davey

LONDON, July 11 (Reuters) - Britain’s Burberry provided more evidence of China’s economic slowdown on Wednesday when the luxury goods company reported a decline in first quarter sales growth.

But Burberry said its growth opportunity in China remained huge, even though first quarter growth in retail revenue from the country dropped to “mid-teens” percent versus growth of about 20 percent in the second half of last year.

“We still see an enormous amount of opportunity ... We think there’s enormous momentum in the Burberry brand and lots more to go for there,” Chief Financial Officer Stacey Cartwright told reporters.

China’s June trade data on Tuesday showed imports rose at only half the pace expected.

“We’re mindful of negative data that comes out,” said Cartwright.

“What we do is make sure that as a business we remain responsive, we focus on what we can control, and our message to our teams is very much to ensure that we continue to outperform irrespective of what the macro throws at us.”

She said Burberry currently has 63 stores in China and sees scope for up to 100, with a focus on opening much bigger stores.

China has been one of the main drivers of a boom in luxury brands, with consumers eager to buy designer labels, including Burberry’s raincoats and other high-end fashions.

But luxury goods firms’ shares have wobbled in the past few months over worries about Europe’s sovereign debt crisis and slowing growth in China and other emerging markets, where runaway demand for designer brands has previously managed to offset weaker trends in the United States and Europe.


Shares in the 156-year-old Burberry, famous for its raincoats lined with a distinctive camel, red and black check pattern, fell 6.3 percent after it said revenue increased an underlying 11 percent to 408 million pounds ($632 million) in the three months to the end of June.

That was down from growth of 15 percent in the fourth quarter of the previous year and compares with analysts’ consensus forecast for growth of 13 percent, according to a company poll.

Chief Executive Angela Ahrendts described the firm’s performance as “robust” but flagged “a more challenging external environment.”

Burberry shares, down nearly 20 percent since the end of March, were down 81 pence at 1,203 pence at 1023 GMT, valuing the business at about 5.15 billion pounds.

French rival LVMH was dragged down 2.8 percent.

Analysts at Investec said it was no surprise Burberry’s shares were down given the small miss versus forecasts and the outlook comment.

“We note however that full year guidance appears unchanged and Q1 is Burberry’s smallest quarter,” they said, adding they remain long-term buyers of the stock.

Burberry globally trades from 196 retail stores, 207 concessions, 48 outlets and 58 franchise stores.

First quarter retail revenue was up an underlying 14 percent to 280 million pounds, with comparable store sales up 6 percent, led by growth in the UK, France, Germany and China.

Wholesale revenue rose an underlying 9 percent to 102 million pounds, in line with company guidance.

However, licensing revenue fell an underlying 5 percent to 26 million pounds, impacted by the phasing of licence terminations.

Burberry added that talks with fragrance partner Interparfums were continuing on whether it wants to buy out the unexpired portion of a license. It must decide by the end of July.

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