Burberry bags annual profit rise

By Rachel Sanderson

LONDON (Reuters) - Fashion brand Burberry Group reported a 14 percent rise in annual profit, helped by strong sales of its luxury handbags and trench coats, and declined to comment on talk it could be a takeover target.

Chief Executive Angela Ahrendts said in a statement Burberry's adjusted operating profit of 206.2 million pounds in the year to March 31 showed "the robustness of our global luxury business in these challenging times".

Underlying revenue at the house, grown from a World War I trench-coat maker, rose 26 percent in Europe and the Americas, and 17 percent in Asia Pacific. Non-apparel, including luxury handbags, shoes and jewellery, rose 39 percent.

Business had become "increasingly challenging during the second half", Ahrendts added, providing the latest indication that the slowdown in mid-market consumer spending on the back of rising living costs is beginning to pressure luxury goods.

But in a sign of Burberry's confidence, Ahrendts added the fashion house, known for its camel and red check, would nearly double its capital expenditure for this year to 90 million to 95 million pounds, from 49 million pounds last financial year, for new stores, refurbishments, IT and a new headquarters.

"Brand momentum remains strong and we are investing in the future, continuing to grow and innovate our iconic outerwear, while developing exciting new businesses such as shoes, jewellery and childrenswear," Ahrendts said.

Burberry shares were flat at 507 pence in early trade, in line with the DJ Stoxx index of consumer goods which includes sector heavyweights LVMH Moet Hennessy Louis Vuitton and Richemont.

Burberry stock has rebounded 27 percent in the past two months, fuelled by unexpectedly strong fourth-quarter sales and bid speculation with U.S. luxury leather goods house Coach being mentioned as a potential buyer.