Burberry posts rise in first quarter retail revenue -UPDATE

10th Jul 2013 07:02

Luxury fashion group Burberry reported an 18 per cent rise in retail revenue to 339m pounds in the first quarter, driven by the strong performance of this year's Spring/Summer fashion.That was 7% ahead of consensus forecasts. In a trading update for the three months to end of June, the company said comparable store sales were up 13%, versus analysts' average estimate for a gain of 5%.The group achieved double-digit comparable store sales growth in Asia Pacific and the Americas and high single-digit growth in Europe, Middle East, India and Africa (EMEIA).During the first quarter, Burberry opened seven mainline stores and closed six. Openings included two stores in Shanghai, a third store in Mexico and a relocation in Frankfurt."We are pleased with our first quarter retail performance," said Chief Executive Officer, Angela Ahrendts. "Spring/Summer 2013 was a standout season driven by innovative marketing, cohesive monthly fashion groups and exceptional execution from all corporate and regional teams."Looking forward, the macro outlook remains uncertain and we will continue to focus our investment on profitable high growth opportunities by channel, region and product categories."The group made no change to its guidance. Burberry expects net new openings to contribute low to mid single-digit percentage growth to retail revenue in full-year 2014.In wholesale, excluding beauty, the company anticipates underlying revenue to decrease by about 10% in the six months to September 30th 2013 from the previous year's £253m. With Burberry directly operating beauty from April 1st, wholesale revenue of about £140m and incremental retail and wholesale operating profit of around £25m is expected in the fiscal year 2014. It will be weighted towards the second half, reflecting the impact in the first half of the move from licence to direct operation.Licensing revenue, excluding £27m royalty income from fragrance and beauty, was £82m in full-year 2013 and Burberry forecasts growth in the next annual results. Retail and wholesale profit for the six months to end of September is expected to be below the level of the prior year (£173m) as the company invests in improving its operating margin. Burberry said the plan is to modestly increase from the operating margin achieved in 2013, which was 17.1% without the £12m benefit of a lower performance-related pay charge. Despite the upbeat quarterly results analysts at Cantor comment that "Burberry trades on a rolling 12 month forward price-to-earnings multiple of 18-times, in-line with its historical average level and approximately 5% below the luxury sector average. The group has executed well on its strategy, with strong full price sales driving impressive comparable store sales growth and margins. "While we believe there is a significant margin opportunity given the gap to its larger luxury peers, we see this as a longer term story and believe the shares are broadly up with events. HOLD."RD