Burberry beats expectations and raise dividend 40%

Tuesday, 15 November 2011
Burberry beats expectations and raise dividend 40%Burberry Group, the U.K.’s largest luxury-goods maker, reported first-half earnings that beat analysts’ estimates and raised its dividend by 40 percent.  Adjusted pretax profit advanced 26 percent to 161.6 million pounds (US$257 million / EUR188.95 million).
"In luxury,Burberry beats expectations and raise dividend 40% 50pc of the business is done in 25 markets around the world. Those 25 top markets are more sheltered, because of local high net-worth customers and tremendous tourism coming in," Angela Ahrendts, CEO of the company, stressed, explaining that Burberry is directing its sales efforts towards the most resilent markets. "That's where investment is going and team focus is going."
Adjusted pretax profit advanced 26 percent to 161.6 million pounds ($257 million), Burberry said today in a statement. That was higher than the 159 million-pound average of five analyst estimates compiled by Bloomberg. The dividend for the six months ended Sept. 30 was increased to 7 pence a share. Burberry fell 36 pence, or 2.5 percent, to 1,385 pence at 8:04 a.m. in London trading, after rising 3.2 percent yesterday. The shares have gained 23 percent this year.
However, the first-half gross margin widened to 66.7 percent from 64.3 percent a year earlier, while operating margin improved to 14.9 percent from 14.8 percent, Burberry said. The maker of 2,195-pound “graphic matelassé” trench coats confirmed that it expects a “modest” improvement in full-year operating margin as it boosts capital spending to as much as 200 million pounds.
Net income climbed to 117.2 million pounds from 83.1 million pounds a year earlier, Burberry said. Net cash was 174 million pounds as of Sept. 30, compared with 181 million pounds on the same date in 2010, the 155-year-old company said. It is also worthy a note to remember how Burberry's shares took a hit earlier this autumn on concern about the outlook for China's growth, with the economies of its export markets, the US and Europe, sluggish at best.
With regards to its bet for further international expansion as key for its sustained growsth, Burberry confirmed that it will open as many as 10 stores in the second half in locations from China to Paris, dispelling concern over slowing demand. Rivals Hermes International (RMS) SCA, LVMH Moet Hennessy Louis Vuitton SA (MC) and PPR (PP) SA all posted quarterly sales that beat expectations in the past month, led by growth in Asia. Global spending on personal luxury goods may gain 10 percent in 2011, according to consultant Bain & Co.
While Burberry is confident of “strong brand momentum” in high-growth flagship and emerging markets, “we remain mindful of, and prepared to react to, any local or global uncertainties as we drive for long-term sustainable growth,” Chief Executive Officer Angela Ahrendts said in the statement. She mentioned Paris, New York, Dubai and Hong Kong as cities where sales are doing well. China only accounts for two out of those top 25 markets, Ms Ahrendts said, and makes up 10pc of Burberry's total sales.
“Burberry has excellent strategic growth opportunities in a luxury market with strong long-term growth credentials,” Seymour Pierce analyst Kate Calvert wrote in a note today, reported The Telegraph.