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Burberry Sales Beat Estimates on Demand for Expensive Lines

Burberry Cuts Wholesale Goal as Quarterly Sales Top Estimates
Pedestrians pass Burberry Group Plc's store on New Bond Street in London. Photographer: Simon Dawson/Bloomberg

Burberry Group Plc, the U.K.’s largest luxury-goods goods maker, reported third-quarter revenue that beat analyst estimates, sending the shares above the price they traded at before the company warned on profit in September.

Sales rose 7 percent to 613 million pounds ($985 million), London-based Burberry said today, exceeding the 601.4 million-pound average of nine analysts’ estimates compiled by Bloomberg. The shares surged as much as 7.1 percent to 1,419 pence.

“These results should reassure and improve sentiment after last September’s blip in trading when Burberry was affected by the industry slowdown rather than anything company specific,” Kate Calvert, an analyst at Seymour Pierce, wrote in a note.

A 13 percent increase in underlying retail sales, led by demand for higher-priced styles, more than offset weaker wholesale revenue that caused Burberry to cut its forecast for sales from that division. Outerwear contributed about half of the growth in retail sales.

Burberry benefited “from a particularly strong week in the run up to Christmas” in an otherwise difficult quarter, Chief Executive Officer Angela Ahrendts said in the statement.

Sales climbed 16 percent in the Asia-Pacific region, led by Hong Kong and China, and advanced 4 percent in each of Europe and the U.S., excluding currency swings, Burberry said. Korea and Italy remained weak, the company said.

Uneven Trading

“Trading patterns are still very uneven” and “we see footfall being softer on a global basis,” Chief Financial Officer Stacey Cartwright said on a call with reporters. Still, more customers are buying in stores rather than looking and the company is “encouraged by a rebound” in China, she said, echoing comments over the weekend by Ermenegildo Zegna SpA.

Wholesale revenue fell 5 percent on an underlying basis because of lower sales to small specialty accounts in Europe. Revenue from the division in the six months ended March 31 will decline by a low- to mid-single-digit percentage excluding currency swings, Burberry said. It previously estimated broadly unchanged wholesale sales in the second half.

“There is a heightened concern on our part about the robustness from a credit perspective of some of those accounts in Italy,” Cartwright said. “We’re taking a very prudent stance.”

Sales at department stores and airports outside Europe are expected to show continued growth, Burberry said.

Licensing revenue climbed 4 percent, excluding currency swings, Burberry said, maintaining its forecast for unchanged sales in the full year. The plan to move Burberry’s fragrance and beauty business in-house from April is on plan, the company also said.

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