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Credit Suisse upgrades Burberry from neutral to outperform, target price increased from 1420p to 1650p.
Meanwhile, licensing revenues are expected to be flat this year, as growth in global product licenses is offset by the planned termination and downsizing of Japanese non-apparel licences.
The firm said that the phasing of revenue and investment is expected to lead to lower operating margins in retail and wholesale in the first half of this year (ending September 2012). For the full year 2012/13 though, it expects "modest improvement" in margin.
REINVESTING FOR THE FUTURE A net 15 mainline stores are planned for the current year and capital expenditure should increase from £153m to £180-200m as retail space is expected to grow by 12-14%. Analysts at brokerage Nomura said this morning that it would maintain its current-year forecasts following the statement and reiterated its buy recommendation for the stock. "Strong returns and pricing power give [Burberry the] confidence to accelerate investment," they said.
The full-year dividend was raised from 20p to 25p, slightly ahead of the 24.58p consensus estimate. "While we remain vigilant about the external environment, we will continue to invest in front-end opportunities within our brand, digital and retail strategies, to drive sustained, profitable growth and enduring customer engagement over the long term," said Chief Executive Officer Angela Ahrendts.
Within retail, all regions and product divisions showed double-digit growth during the year with total retail revenues rising 32% to £1,270.3m. However, as previously indicated, like-for-like growth (comparable store sales) slowed from 16% in the first half to 12% in the second, resulting in a 14% increase year-on-year. Burberry opened 23 mainline stores - including the first flagship stores in Hong Kong, Paris and Taipei - and 25 concessions during the 2011/12 year, closing 10 and 16, respectivel
Despite the strong growth reported, the stock was under heavy selling on Wednesday. Analysts at Investec said that due to the in-line figures, "the lack of upgrades may see bears take issue today". By 09:44, shares were down 3.61% at 1,336p.
Revenue figures for the second half were already disclosed in the pre-close trading update last month and so won't come as much surprise to the market. Sales totalled £1,857m, up 24% from £1,501m the year before. Underlying growth, calculated at constant exchange rates, was 23%.
Iconic British luxury brand Burberry reported solid and balanced growth in the year ended March 31st, with profits coming in marginally ahead of expectations. Adjusted profit before tax (which excludes restructuring costs and other items) increased by 26% from £298m to £376m, slightly ahead of consensus forecasts of £374.7m. Meanwhile, the retail/wholesale operating margin improved by 80 basis points to 16.4%.
Angela Ahrendts, Chief Executive Officer, commented: "Burberry has completed another successful year, with revenue up 24% and adjusted profit before tax up 26%. An intense focus by our global teams on business, brand and culture in recent years has resulted in a strong foundation across channels, regions and products. While we remain vigilant about the external environment, we will continue to invest in front-end opportunities within our brand, digital and retail strategies, to drive sustained, profitable growth and enduring customer engagement over the long term."
Iconic British luxury brand Burberry reported profits broadly in line with expectations in the year ended March 31st. Adjusted profit before tax (which excludes restructuring costs and other items) increased by 26% from £298m to £376m, slightly ahead of the £374.7m estimate. Meanwhile, the retail/wholesale operating margin improved by 80 basis points to 16.4%. Revenue figures for the second half were already disclosed in the pre-close trading update last month and so won't come as much surprise to the market.
Investec has reiterated its buy recommendation and 1,690p target price for British luxury brand Burberry in spite of today's negative market reaction to the firm's full-year results. "We don’t expect to change our underlying trading forecasts. The lack of upgrades may see bears take issue today, but we are happy to remain buyers given the group’s long-term potential," the broker said
Luxury goods group Burberry (BRBY) remains something of a recession defying phenomenon, especially in the Far East, and as such this best of British brand has become something of a barometer for the health of China, the world’s second largest economy. The bull case received a boost in March as reports came from China that it would reduce taxes on luxury imported goods, something that caused the share price of Burberry to spike. However, there are still fears that the group’s valuation at £14 plus a share and on 23 times earnings is rather rich in the current climate. Much will depend on the forthcoming outlook from Burberry, although it is likely the retailer will find it tough to project continued outperformance for the rest of 2012.
Trade Summary Dream Scenario: The rate of growth in China is maintained over the rest of 2012, lifting the overall Burberry performance.
Nightmare Scenario: Doubts over whether Burberry can maintain its underlying growth levels continue to act as a drag on the share price.
Key Technicals Shares in Burberry Group have established solid looking support at and above initial February support towards 1,380p intraday. The implication is that while there is no sustained price action below 1,400p, Burberry shares will go on to at least retest the April 1,600p plus resistance zone.
The market may have been disappointed with the marginal slowdown in Burberry's underlying growth, but given the current macro uncertainties and the relative stagnation affecting many other FTSE 100 and retail sector plays, it remains a key growth prospect in the Galvan Research portfolio for the rest of the year.
On April 17th, luxury brand Burberry said that total revenue grew to £1,027m in the second half ended March 31st, up from £877m in the same period the year before and up 18% on an underlying basis. However, in the third quarter alone, underlying growth was 21%. With underlying revenue up 18% in the second half, Burberry said it was pleased with the year-end performance across all channels, regions and product divisions. Underlying retail sales growth was maintained at 23% from the third quarter to the fourth, while comparable store sales in the half increased by 12%, with the UK, France and Greater China remaining strong.
Merchant Securities has cut its rating for luxury brand Burberry from buy to hold on valuation grounds, but has maintained its positive stance on the group. "We continue to believe that Burberry is a beneficiary of growing demand from global luxury travellers, especially in Asia, Middle East and Russia, which are more favourable than the domestic European luxury market, which appear subdued," said analyst Amisha Chohan. However, with the stock trading at a 19% premium to the luxury sector - "justified by the more favourable growth profile of the business" - the broker now believes that the stock is fairly priced, hence the downgrade.
A woman of few words.... Angela Ahrendts, Chief Executive Officer, commented: "With underlying revenue up 18% in the second half, we are pleased with Burberry's finish to the year across all channels, regions and product divisions. Looking ahead, while we remain vigilant about the external environment, our global teams continue to focus on optimising our core brand, digital and cultural initiatives, while investing to drive sustainable, profitable growth."
Burberry Group plc, the global luxury company, today reports on trading for the six months to 31 March 2012. The financial information contained herein is unaudited. Highlights · Total revenue of £1,027m, up 18% underlying · Retail revenue of £743m, up 23% underlying - Retail now 72% of group revenue - 12% growth in comparable store sales - Led by flagship markets in UK, France and Greater China - Balanced growth across all four product divisions · Wholesale revenue of £230m, up 7% underlying, as guided - Double-digit % growth in US, Emerging Markets and Asia Travel Retail, excluding impact of planned rationalisation of distribution - Core outerwear and large leather goods sales underpinned by replenishment · Licensing revenue of £54m, up 5% underlying, as guided · Further operational progress - Eleven store openings including first flagships in Paris and Taipei - Momentum in social media; Facebook fans doubled to over 12m in the year - Increased focus drove men's accessories and tailoring · Looking forward, Burberry is planning - 12-14% increase in average retail selling space for FY 2012/13; weighted towards larger stores - Mid single-digit % growth in wholesale revenue for H1 2012/13; double-digit % growth excluding planned rationalisation - Broadly unchanged licensing revenue for FY 2012/13; double-digit % growth from global products offset by Japanese non-apparel
http://www.investegate.co.uk/Article.aspx?id=201204170700144461B
UBS has raised its target price for luxury brand Burberry from 1,370p to 1,580p ahead of its fourth quarter sales update next week. The broker is expecting the company to report a 16.5% growth in sales (constant currency), significantly lower than the 23.7% growth seen in the first nine months of the year. While the price-to-earnings multiple of 19 remains in line with the three-year average for Burberry, UBS clearly thinks this is too expensive and retains a neutral rating with the stock trading at a 20% premium to the European luxury sector.
latest offering on iii: http://www.iii.co.uk/tv/episode/burberry-group-brby
Nomura has maintained its buy stance and 1,530p target price on luxury brand Burberry, despite the negative market reaction on Tuesday, saying that the firm has reported a strong third quarter and brand momentum remains intact. The broker highlights the double-digit mainline comparable store sales growth in Asia and Europe with the Americas up high single digits. Nomura remains confident: "Burberry is well positioned to accelerate investment and space growth, while defending comp store sales through product development, flagship market investment and innovative marketing."