Burberry Outlook Limited to `Top Half' of Estimates; Shares Fall

Burberry Group Plc, the U.K.’s largest luxury retailer, said annual profit will be in the “top half” of analysts’ estimates, disappointing those who expected upgrades after second-quarter sales beat their goals.

Adjusted pretax profit will be 240 million pounds ($381 million) to 270 million pounds, Chief Financial Officer Stacey Cartwright said today on a call with journalists. Second-quarter sales increased 11 percent to 382 million pounds, the London- based company said, more than the 367.8 million-pound average estimate of four analysts compiled by Bloomberg.

Burberry fell as much as 4.1 percent in London trading, having risen 73 percent this year before today. The shares have soared as the company speeds up deliveries and uses digital media to increase awareness and lure shoppers into stores. Burberry is also seeking to tap growth in China and in July said it will take control of its franchised stores in the country.

“We think the market ought to focus on the fact there is no implied upgrade on the back of the update and the shares look overbought,” John Guy, an analyst at Royal Bank of Scotland in London, said in a research report today.

Burberry shares dropped 25 pence, or 2.4 percent, to 1,014 pence at 10:10 a.m., after falling to as low as 996 pence.

Excluding Spain, where the company closed a factory, second-quarter sales rose to 359 million pounds, led by growth in Asia and demand for trench coats and large leather goods.

Licensing Revenue

Burberry raised the forecast for revenue at its licensing unit, predicting a “mid-single digit” decline compared with a previous target of as much as 10 percent. The company cited demand for watches, fragrances and its Burberry beauty range.

Investec Securities analysts said the consensus profit estimate for the year is likely to rise by about 5 percent, with scope to raise their own prediction by about 4 percent.

The luxury retailer will add 10 stores in the second half, including five in China, and forecast a 10 percent increase in second-half wholesale revenue, excluding China.

Gross margins had a “material” improvement in the first half, Cartwright said, adding she is “confident we will beat” analyst estimates of a 4 percentage-point gain in the period.

Cartwright said Burberry is “actively seeing” Chinese customers becoming the biggest consumers in Europe, already accounting for 30 percent of sales in its London outlets, the biggest group. The retailer is adding Mandarin-speaking assistants in stores to target them.

Burberry, whose share-price surge this year has also been helped by takeover speculation, won’t comment on bid rumors, Cartwright said. Chief Executive Officer Angela Ahrendts is “committed to this business as ever,” she said.

To contact the reporter on this story: Andrew Roberts in Paris at aroberts36@bloomberg.net.

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net.

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Burberry Sales Rise 11% on Asia, Demand for Coats, Leather

Chris Ratcliffe/Bloomberg

Burberry shares have soared as the company speeds up deliveries and uses digital media to increase awareness and lure shoppers into stores.

Burberry shares have soared as the company speeds up deliveries and uses digital media to increase awareness and lure shoppers into stores. Photographer: Chris Ratcliffe/Bloomberg

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Burberry Group CEO Angela Ahrendts

Dmitry Beliakov/Bloomberg

Burberry Chief Executive Officer Angela Ahrendts.

Burberry Chief Executive Officer Angela Ahrendts. Photographer: Dmitry Beliakov/Bloomberg