The company intends to continue its expansion plans, whilst remaining flexible in tapping on the brakes should circumstances dictate. Continuing investment in its business will of course weigh on profit in the medium term, whilst the company could become a victim of its own success given increasingly tough comparatives. Even so, Burberry remains a retail growth success.
Retail revenue growth (45 per cent underlying) drove the beat. Concerns about Chinese growth have weighed on the shares of late – we feel this is overdone. Operating margin guidance has been nudged up and full year guidance reiterated. Although Burberry will not be immune from continued market turbulence, on a medium-term view we strongly reiterate our Buy.
CHRIS ALEXANDER | BNP PARIBAS
Burberry’s second quarter and first half trading update is very resilient and has come in as per estimates indicated in our preview, with underlying sales growth of 30 per cent giving first half sales of £830m. Those anticipating a more severe slowing in growth rates are likely to revise estimates upwards but overall we expect limited change to current forecasts.