As Burberry a delivers positive update Helal Miah, investment research analyst at The Share Centre, explains what it means for investors and why they are recommended to ‘hold’.
Burberry delivered a positive Q1 trading statement despite the weaknesses in the global economy. The group performed well internationally with double digit growth from Asia and America, and high single digit growth from Europe, Middle East, India and Africa.
Underlying retail revenue was up 18% to £339m, with comparable same store sales up 13%. Figures were driven by an exceptional response to the Spring/Summer 2013 collections, from both offline and online sales. Improving sales from Burberry is good news for the personal goods sector as data from The Share Centre’s Profit Watch UK showed that last year Burberry accounted for 57% of the sector’s revenues in the FTSE 350.
Growth seeking investors will be pleased to hear that there were a further seven new mainline store openings, which contributed to the rise in sales, and the business has reaped the rewards of past investments into its digital platform. While the integration of its Beauty division is progressing as planned, the Wholesale division, which is going through structural changes, is expected to experience a 10% fall in revenues in the six months to 30th September 2013.
While the business has performed surprisingly well, the weak environment in Europe and the deteriorating Chinese economy remain headwinds. We believe the shares are currently fairly valued and continue to recommend investors ‘hold’ Burberry.