StockBeat: Burberry Follows England Cricketers' Path to Success

July 17
05:04 2019

By Geoffrey Smith — It’s not gone unnoticed that England’s first-ever victory in the cricket World Cup came with a substantial dollop of help from foreign-born players. The same formula appears to be working for luxury goods group Burberry (LON:BRBY), whose shares are back within 10% of their all-time high on Tuesday after an impressive performance in the three months to June.

Burberry, famous for its trademark check patterns, posted a 4% gain in comparable sales in the quarter, the first of its fiscal year, thanks to the roll-out of designs by its new chief designer Riccardo Tisci, who was hired by fellow Italian Marco Gobbetti last year. Gobbetti himself had taken over from Christopher Bailey at the start of 2017.

The acceleration in sales growth, from a disappointing 1% three months earlier, reflected the fact that Tisci’s designs now account for 50% of product in the company’s stores, a figure that should rise to 65% in the next three months and 75% by the end of the year. The amount of old stock that is being sold at discounted prices (Burberry doesn’t break that out precisely) should accordingly fall.

The company’s shares rose over 9% in early trading in London Tuesday, easily outpacing the rest of the FTSE 100, which was itself the best-performing among European indexes with a 0.2% gain. The Stoxx 600 was up less than 0.1%, as was the German Dax and the French CAC 40.

The performance was due chiefly to strong sales in greater China and the Far East, a reassuring sign of stability in Asian demand that also gave a modest lift to its bigger French rivals – LVMH (PA:LVMH), Hermes (PA:HRMS) and Kering (PA:PRTP) – in early trading.

Asia Pacific sales grew by a little less than 10%, while mainland China sales grew by a “mid-teen” percentage despite the well-publicised slowdown in Chinese growth. Investor relations head Annabel Gleeson acknowledged there had been a modest impact on sales in Hong Kong from the recent political unrest. The company had closed two of its flagship stores for five days to protect staff, Gleeson said.

Gleeson also noted that Tisci will be turning his attentions to updating Burberry’s signature trenchcoats in the coming months, after concentrating first on its fashion collections.

At 2,180 pence, Burberry’s shares are now only 8% off the all-time high they hit last year as investors started to buy into Gobbetti’s vision of re-positioning the group as an ultra-luxury brand name and stopping a gentle drift downmarket.

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