Burberry posts strong Christmas sales; shares soar 6%
British luxury brand Burberry posted a 14 percent rise in underlying retail revenue in the Christmas quarter, though it cautioned that at current levels, exchange rates will be a significant headwind in the balance of its second half.
The 158-year-old seller of raincoats and leather goods, known for its camel, red and black check pattern, said on Wednesday it made 528 million pounds ($869.1 million) of retail revenue in the three months to Dec. 31.That compared to analyst's average forecast of 520 million pounds, 464 million pounds in the same period last year and first half growth of 17 percent.
Comparable store sales rose 12 percent, compared to 13 percent in the first half, reflecting double-digit growth in Asia Pacific; and mid to high single-digit growth in the Americas and EMEIA (Europe, Middle East, India and Africa) divisions.
"This performance reflects continuing strong brand momentum and our team's intense focus on retail execution, supported by a planned increase in investment in marketing, customer service offline and online and our retail portfolio," said Chief Executive Angela Ahrendts.
(Read more: Retailers' sales rise in December)
Shares in Burberry have fallen 7 percent since Octover 15 when it said Ahrendts will step down in mid-2014 to take up a job at Apple and hand over to creative director Christopher Bailey, but are still up 11 percent over the last year.
Shares rose sharply higher at the session open on Wednesday, clocking gains of 6.5 percent by 8.30 a.m. London time. They closed at 1,469 pence on Tuesday, valuing the business at 6.49 billion pounds.
The jury is still 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.
Luxury investors are closely monitoring any signs of recovery in China, the industry's former principal engine of growth, hampered by an economic slowdown and the government's crackdown on conspicuous consumption.
(Read more: Angela Ahrendts leaves Burberry for Apple)
While demand in the United States and Japan is seen as remaining strong and tourist spending in Europe should recover after having suffered in 2013, adverse foreign exchange movements are likely to continue impacting European luxury goods makers' revenues once converted in their home currency.
"The macro environment remains uncertain, but we are confident that our proven strategies will continue to deliver long-term value for shareholders," said Ahrendts.
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