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BURBERRY BANKING ON GLOBAL APPEAL

GENERATING CASH: Ahrendts sees scope for growth

Thursday May 29,2008

By Andrew Johnson

LUXURY fashion group Burberry is targeting wealthy women in India, the US and South Africa after defying the credit-crunch last year.

The £2billion company saw pre-tax profits leap by 26 per cent to £196million on revenues up 17 per cent to £995million for the year to March.

In particular, Burberry focused on accessories such as shoes, jewellery and handbags, which now generate £320million in revenues, a rise of 39 per cent.

However, its shares dipped 8p to 499p on the back of profit-taking.

Chief executive Angela Ahrendts acknowledged trading had become more challenging during the second half as the credit crunch bit but added the company, which has 97 shops worldwide, had plenty of scope to grow.

It was planning new openings in the US and emerging markets such as Russia, South Africa and India where, according to Ahrendts, it is currently “under-penetrated”.

It plans to open up to 10 stores in the US and up to 20 in emerging markets this financial year, hiking investment from £49million last year to £95million.

Chief financial officer Stacey Cartwright said there were a number of factors behind Burberry’s success. “One reason is we are a global luxury brand and that insulates us to some degree from the economic woes that are out there.”

The group was well diversified in other ways, she added, striking a good balance between selling through its own shops and to other retailers, and offering products at a range of different prices.

Cartwright said the group was planning to refurbish US stores to bring them up to date.

The investment could be funded from existing cash-flows. “We are a very, very cash-generative company,” Cartwright pointed out.

Redburn analyst Lisa Rachal said yesterday Burberry was the only luxury goods company worth investing in.