Burberry Buys Chinese Stores From Franchise Partner

16th Jul 2010 08:11

By Molly Neal Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K.-based luxury fashion house Burberry PLC (BRBY.LN) Friday announced the GBP70 million acquisition of 50 stores in China as it continues its strategy to take greater control of its worldwide brand. The cash deal to buy the stores from its existing franchise partner in China will allow Burberry to better control its brand and implement its own customer services, IT, public relations and marketing campaigns to boost profits, the company said. The stores generated GBP75 million of sales and GBP14 million of profit for Burberry's franchise partner in China last year, but the company expects the stores to contribute GBP20 million to group profit by March 2012. However the deal, which is due to complete in the Autumn, will be earnings neutral next year because the profit that is currently booked through the wholesale division will move to the retail division. Wholesale profit is booked at the point of delivery whereas retail profit is booked at the point of sale. Chief Executive Angela Ahrendts said the deal is the "natural next extension" of Burberry's "pure global brand strategy worldwide." The stores are located in 30 cities in China, including nine in Beijing and four in Shanghai. Burberry also already directly operates 13 stores in Hong Kong, one in Macau and 19 in Taiwan. Burberry's shares have risen 86% in the last twelve months as the company's trading has consistently outperformed expectations. At 0705 GMT, Burberry's shares were up 18 pence, or 2.2% at 808 pence in a flat London market. The company Tuesday reported a 27% rise in first-quarter sales and said it expects its luxury brand to remain relatively immune to economic pressures. -By Molly Neal, Dow Jones Newswires; 44-0-207 842 9358; [email protected] (END) Dow Jones Newswires July 16, 2010 03:11 ET (07:11 GMT)