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Burberry turns a corner

RESULT: Luxury goods retailer Burberry is making a comeback as sales rose across the board, with particularly strong trading in China
May 22, 2013

Burberry (BRBY) has bounced back since the luxury goods retailer issued a profit warning last September, with growth across all regions and products divisions, including a 20 per cent rise in sales from China.

IC TIP: Hold at 1514p

In fact, revenue from Asia Pacific rose 13 per cent to £745m, which helped group underlying operating profit (stripping out a one-off charge of £82.9m relating to the termination of a fragrance and beauty licence relationship) to rise 13 per cent to £428m. That was 4 per cent ahead of consensus expectations. Asia now accounts for 39 per cent of total sales - more than any other region.

Retail sales were heavily weighted to the second half, with trading over Christmas and the Chinese New Year boosting growth. Overall, store traffic was soft, although this was offset by increased conversion rates and higher average transaction values, helping underlying retail sales grow 12 per cent to £1.4bn, while same-store sales rose by 5 per cent. Wholesale reported sales growth of 1 per cent as Burberry continued to rationalise accounts and department stores were more conservative with stocking.

Global expansion continued and 14 net mainline stores and six concessions were opened in the year. Fragrance and beauty was brought in-house in April, which management says will be key contributors to growth

Broker Nomura expects adjusted EPS of 75p in 2014, rising to 82p in 2015 (from 70p in 2013).

BURBERRY (BRBY)
ORD PRICE:1,514pMARKET VALUE:£6.7bn
TOUCH:1,513-1,515p12-MONTH HIGH:1,517pLOW: 998p
DIVIDEND YIELD:1.9%PE RATIO:26
NET ASSET VALUE:230pNET CASH:£297m

Year to 31 MarTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20091.20-16-1.412.0
20101.2816618.814.0
20111.5029649.320.0
20121.8636660.425.0
20132.0035158.329.0
% change+8-4-3+16

Ex-div: 3 Jul

Payment: 1 Aug