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Luxury Retail: Burberry Full-Year Profit Above Analyst Expectations

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(Image: Stock.xchng)
(Image: Stock.xchng)

BUSINESS

  • UK-based Burberry Group pre-tax profit hits £428 million
  • Asia-Pacific market share, accounting for 35% of Burberry’s total sales, up by 13% thanks to greater demand for luxury products
  • Burberry to shift focus from North America and Europe to Latin America and China
  • Burberry succeeding in hard-hit retail industry with focus on fast-growing markets 

UK luxury-goods giant Burberry Group PLC, famous for its trench coats, reported a full-year pre-tax profit increase of 14%, bolstered by retail growth in the Asia-Pacific region, where the company is opening more branded stores.

While financial analysts anticipated an average pre-tax profit of £415 million, Burberry’s profit reached £428 million, or $652 million, for the fiscal year ending March 31.

The Asia-Pacific market, already accounting for 35% of Burberry’s total sales, grew by 13%, thanks to greater demand for luxury products in Hong Kong and China. In China, specifically, revenue increased by 20% following the opening of 11 stores during the past fiscal year.

For the first half of the current fiscal year, Burberry expects profit to be less than that of the previous year as it shifts focus from sales in non-Burberry stores or wholesale markets to sales at Burberry-branded stores in the faster-growing Asian and Latin American markets.

Retail sales presently bring in 71% of Burberry’s total revenue. However, Burberry anticipates a 10% decline in wholesale revenue within the next year as it slows down activity in North America and Europe, regions which posted a relatively moderate 6% growth in revenue last year.

Within the next year, Burberry plans to open at least 25 branded shops, including three large-format stores in tourist-friendly Shanghai, and close 15, for a net of 10, and is committed to spending £200 million in its expansion efforts.

Burberry Booming Despite General Downturn in Retail Industry

Burberry’s predictions of strong growth in China are in contrast to more moderate predictions by its luxury womenswear rivals, LVMH Moët Hennessy and PPR, which owns Gucci.

Both experienced slower growth in the Asia-Pacific region, with Louis Vuitton reporting a three-year low in growth of leather-goods and fashion revenue.

Beyond China, Burberry is focusing on Brazil, with four new stores, for a total of seven in that country. While the Brazil outlets are not yet turning a profit, Burberry believes there is potential for great gains, with increased demand for Western luxury goods.

Key Statistics – Womenswear Industry in Asia Pacific (source: MarketLine)

  • In 2012, the Asia-Pacific womenswear industry was estimated to total $157.1 trillion in revenue, marking a 1.8% compound annual growth rate (CAGR) from 2008 to 2012.
  • The most profitable Asia-Pacific womenswear sales in 2012 came from accessories, footwear, clothing and sportswear retailers, who reported revenue of nearly $101.5 trillion.

By Christelle Agboka for
Christelle Agboka is a freelance journalist based in Kingston, Ontario, who covers business and economy news.

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