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Burberry bang on trend

TIP UPDATE: Burberry is fast becoming one of the leading global luxury goods brands, but the valuation is still asking too much
November 16, 2010

Burberry's latest half-year results prove that fashion doesn't have to be a triumph of style over substance, after the luxury goods retailer announced record profits and massive growth in Asia Pacific, where sales climbed 37 per cent.

IC TIP: Sell at 1021p

Under the leadership of chief executive Angela Ahrendts, Burberry has been transformed into a truly global brand, and one that has shaken off any remnants of 'chav' association to become the darling of the fashion media. It's clothes have graced 130 covers in the last six months, while Vogue magazine proclaimed that it put on "the biggest and starriest show of London Fashion Week" watched live by 650,000 people round the world over the web.

And just as Burberry looks to have got its branding and design right, so Ms Ahrendts continues to push through operational improvement that's allowing it to fully capitalise on its broad international appeal, including a more automated store replenishment process and a new global e-commerce platform. Technology is also enabling Burberry to improve brand consistency across its retail estate, with 20 stores added in the period at a cost of £30m, on top of the 50 stores acquired from its franchise partner in China.

Broker Evolution Securities expects full-year pre-tax profits of £267m and EPS of 43.3p in the year to March 2011 (from £227m and 37.8p last year).

BURBERRY GROUP (BRBY)

ORD PRICE:1,021pMARKET VALUE:£4.45bn
TOUCH:1,018-1,021p12-MONTH HIGH:1,065pLOW: 556p
DIVIDEND YIELD:1.5%PE RATIO:41
NET ASSET VALUE:134pNET CASH:£181m

Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
200957278.413.13.5
201067311819.15.0
% change+18+50+46+43

Ex-div: 29 Dec

Payment: 28 Jan

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