Burberry to invest in new, bigger stores

LONDON Wed May 23, 2012 9:48am BST

A mannequin is displayed in a window of Burberry's in central London July 15, 2008. REUTERS/Alessia Pierdomenico

A mannequin is displayed in a window of Burberry's in central London July 15, 2008.

Credit: Reuters/Alessia Pierdomenico

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LONDON (Reuters) - British luxury brand Burberry posted a 26 percent jump in profit as expected and said it would invest up to 200 million pounds ($316 million) in new outlets and expanding existing stores in London, Chicago and Hong Kong.

The 156-year-old seller of raincoats and leather goods, known for its camel, red and black check pattern, said on Wednesday it made an underlying pretax profit of 376 million pounds ($594 million) in the year to March 31.

That compared to analysts' average forecast of 377 million pounds, according to a company poll, and 298 million pounds made in 2010/11.

Revenue rose 24 percent to almost 1.9 billion pounds with underlying growth rates ranging from 15 percent in Europe and the Americas to 41 percent in Asia Pacific.

Luxury goods shares have wobbled in recent months over worries that Europe's long-running debt crisis could help trigger an economic slowdown in emerging markets such as China, where runaway demand for high-end goods has offset weaker trends in the United States and Europe.

Last month Burberry reported a slowdown in quarterly sales growth, while Aquascutum, another upmarket British brand, fell into administration before being sold earlier this month.

Burberry said on Wednesday that it planned to increase retail selling space by 12 to 14 percent in the coming year, shifting to larger format stores and opening about 15 new outlets focused on emerging markets and busy tourist centres.

The cost and timing of the investment will result in a lower operating margin from retail and wholesale during the first half of the year but for the full year the company said it expected a further modest margin improvement.

The company said total capital expenditure in the current year would be between 180 million and 200 million pounds with about one third of it going towards larger format stores including on London's Regent Street, Pacific Place in Hong Kong and Chicago.

Shares in Burberry closed on Tuesday at 1,386 pence, valuing the business at over 6 billion pounds.

(Reporting by Paul Hoskins; Editing by James Davey)

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