UPDATE: Burberry Year Starts Strongly, 1Q Sales Up 27%

13th Jul 2010 07:47

(Adds CEO, analyst's comment, detail.) By Simon Zekaria Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. luxury fashion house Burberry PLC (BRBY.LN) Tuesday said its new fiscal year started strongly as it posted a 27% rise in first-quarter sales. Sales in the quarter ended June 30 rose to GBP291 million from GBP229 million a year earlier, including the restructured Spanish operations, beating market expectations of GBP261 million. That compares with a 2% fall in sales in the fourth quarter of fiscal 2010 and a 15% rise in the third quarter. The performance was driven by Burberry's operations in Europe and Asia Pacific with double-digit same-store sales growth. Retail sales rose 21% year-on-year, with sales from stores open at least a year up 10% and new space generating 6% of total growth. Wholesale sales rose 51%, boosted by increased goods flow and supply chain efficiencies, the group said. Licensing sales increased 36%, supported by a favorable yen hedge rate that will benefit the first-half. "With double-digit sales growth in both retail and wholesale, Burberry has delivered a strong start to the year," Chief Executive Angela Ahrendts said in a statement. At constant exchange rates, first-quarter sales rose 21%. In May, Burberry--known for its outerwear apparel such as raincoats and iconic red, black and camel colored checked designs--said it would accelerate spending on growth initiatives after it recorded a forecast-beating 23% rise in full-year core earnings to March 31. The company's current guidance is for 10% growth in average retail selling space in the year to March 2011 and wholesale sales in the first half to Sept. 30 to grow at constant rates by around 10% including Spain. For its licensing business, Burberry expects a full-year decline of 5% to 10% at constant exchange rates. Capital expenditure for 2010/2011 will increase to GBP130 million from GBP70 million last year as the company invests in new stores, store refurbishments and the supply chain. It has focused on stripping out unprofitable lines and expanding its accessories range, while also investing in new supply infrastructure to facilitate order growth without overstocking and discounting. "The clear momentum in the business and our robust financial position together reinforce our confidence to increase investment for the future," Ahrendts said. Investec analyst Katharine Wynne said the first quarter numbers were very good and should lift its share price. Burberry shares closed Monday at 789 pence, valuing the company at GBP3.43 billion. The stock has risen 90% over the past 12 months. -By Simon Zekaria, Dow Jones Newswires; +44 207 842-9410; [email protected] (END) Dow Jones Newswires July 13, 2010 02:47 ET (06:47 GMT)