Burberry has the emerging markets all sewn up

Just like the famous Burberry mac, the luxury fashion retailer is watertight, future-proof and seemingly impervious to recession. For now.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013
They say great style never goes out of fashion and Burberry, with half-year profits at £158.7m, is definitely still a la mode. It has emerged unscathed from the 'Chav Wars' of yesteryear, where 'yoofs' clad in Burberry checks, splattered with blood and vomit threatened to destroy the brand's 'luxury' kudos. Unsurprising then, the fashion house has been seeking out new revenue streams far away from Essex. Its successes in China, Latin America and Paris have paid off handsomely - profits are up 23% up on 2010.

Burberry CEO Angela Ahrendts says: ‘As we begin to see initial returns from five years of infrastructure investments, we are confident… [of] both our strong brand momentum and the luxury sector's opportunities, especially in high-growth flagship and emerging markets.’

Menswear has been the big seller across the board as dandies bounce into winter with Burberry trench coats and shiny new shoes. To shrug off investors’ fears over the current financial gloom, Burberry has even increased its dividend payment to shareholders by 40%.

Then why are alarm bells ringing? Is it because second quarter figures aren’t quite as robust as Ahrendts makes out? Sales have definitely slowed in the last three months. And the markets weren’t impressed by the group’s performance: Burberry’s share price sank 4% once results were posted earlier today, despite beating the City’s expectations.

Nevertheless, Burberry is no sitting duck, waiting to be bagged by the recession. Its forays into the emerging markets have been - and continue to be - bullish. Around 19% of Burberry's turnover now comes from China, the Middle East, Russia, Turkey and India. Its existing stores aren’t doing too badly either; there’s been a 16% jump in same-store retail sales over the same period.

Let’s just hope it keeps raining men in the emerging economies for the Burberry mac.

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