Burberry Stock Surges as Quarterly Sales Beat Estimates

Burberry A/W 2013 | Photo: Sonny Vandevelde

LONDON, United Kingdom — Burberry Group Plc reported fourth-quarter revenue that beat analysts’ estimates, helped by demand for its more expensive products. The stock had the biggest gain in more than six months.

Sales at the U.K.’s largest luxury-goods maker rose 11 percent to 503 million pounds ($772 million) in the three months ended March 31, London-based Burberry said today in a statement. Analysts predicted 485.1 million pounds, according to the average of 11 estimates compiled by Bloomberg.

Burberry’s gain contrasts with the performance of rivals. LVMH Moet Hennessy Louis Vuitton SA, the world’s largest luxury- goods company, this week reported the slowest growth in fashion and leather-goods revenue in more than three years, citing a drop in Japanese tourism and fewer store visitors in China. Prada SpA also reported figures that disappointed analysts and said cold weather and Europe’s crisis had hurt sales.

“Burberry continues to execute well,” Fraser Ramzan, an analyst at Nomura with a neutral rating on the stock, said in a note to clients. “Our confidence in the group’s ability to deliver has increased.”

Burberry shares rose 5 percent to 1,329 pence at 8:26 a.m. in London trading after surging as much as 7.7 percent earlier in the day. The stock had declined yesterday on concern over LVMH’s performance in fashion and leather goods.

New Stores

“We expect the external global environment to remain challenging,” Burberry Chief Executive Officer Angela Ahrendts said in the statement. Footfall in the company’s biggest stores remained “soft,” Burberry said, while the value of the average transaction increased.

Quarterly sales gained 10 percent excluding currency swings. Six-month sales climbed 15 percent in the Asia Pacific region, 10 percent in the Americas and 4 percent in Europe excluding currencies, Burberry said.

Burberry plans to open about 25 so-called mainline stores and close 15 this fiscal year, while opening about 10 concessions and closing the same amount, it said. New outlets will be weighted towards China and Latin America and are expected to boost retail revenue by a low to mid single-digit percentage in the year through March 2014.

Temper Enthusiasm

“The guidance should temper enthusiasm” about Burberry’s performance last quarter, Bethany Hocking, an analyst at Investec Securities, wrote in a note.

Excluding beauty, which Burberry began directly operating this month, underlying wholesale revenue will decrease by about 10 percent in the six months through September. Wholesale customers throughout the world planned more conservatively for fall and revenue continues to be affected by account closures and Burberry ending some entry-price products in North America, it said.

Burberry forecast wholesale revenue from beauty of about 140 million pounds and incremental so-called retail/wholesale operating profit of about 25 million pounds in the year through March 2014, repeating previous guidance.

Licensing revenue will be little changed in the full year on a reported basis, impacted by hedging the Japanese yen.

Sales in Burberry’s own stores rose 14 percent in the quarter. While trading was uneven in the second half of the fiscal year, a 14 percent increase in average retail selling space and demand for the trenchcoat maker’s more expensive collections helped compensate for traffic, Burberry said.

Fourth-quarter sales by third-party distributors fell 1 percent as Burberry cut some accounts in Europe, where local demand was weak, it said.

Revenue from licensing gained 2 percent in the quarter.

By: Andrew Roberts; Editors: David Risser, Robert Valpuesta, Marthe Fourcade, Celeste Perri.