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Burberry Embarks on Expansion Drive

Thursday, 26 May 2011 | 6:17 AM ET

Burberry is embarking on an aggressive store expansion plan after announcing pre-tax profit rose almost 40 percent to 296 million pounds ($482 million) in the year to April.

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The luxury goods company, best-known for its distinctive camel, red and black check, has been boosted by the increased spending power of Chinese consumers. It is now planning to open more stores in Europe too.

Burberry’s share price fell by 2.73 per cent to £12.84 in London Thursday morning.

Nick Bubb, retail analyst for Arden Partners, said the dip in the company’s share price was due to “profit-taking, after the strong run in the shares”.

Angela Ahrendts, chief executive of Burberry, told CNBC: “Now that the luxury market has turned around and is placed for double-digit growth around the world, and based on the momentum that the brand has and the number of customers that we are able to reach, we have every confidence that it’s time to shift focus over to the front end of the business."

“We’re really accelerating profit in flagship markets like London, Paris, Milan and Hong Kong.”

Burberry has set aside £180-£200 million for capital expenditure to pay for the expansion plans.

The rise of the Chinese consumer has helped buoy the luxury goods market despite downturns elsewhere around the world.

“China is a very important market for us,” Ahrendts said.

Late last year, Burberry bought back its Chinese distribution business. It has since opened 10 new stores and the business has grown by about 30 percent.

Ahrendts said that Burberry is trying “to really reintroduce the brand to these very influential Chinese customers”.

“They are impacting the luxury world, not just in China but everywhere they travel.

“One-third of our stores around the world have Mandarin-speaking sales associates,” she said.

The company’s online operations also allows customers to click and call Mandarin or Cantonese-speaking sales people.

Accessories have helped boost sales too, with overall sales of non-apparel goods, such as handbags, shoes and accessories, jumping by 35 percent year-on-year and making up almost half the group’s £300 million revenue growth over the period.

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