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Burberry annual profits up 23 pct on sales growth

British Luxury goods company Burberry Group PLC reported a 23 percent rise in full-year profits Wednesday, thanks to strong growth in non-clothing sales in North American and the opening of new stores in emerging markets.
/ Source: The Associated Press

British Luxury goods company Burberry Group PLC reported a 23 percent rise in full-year profits Wednesday, thanks to strong growth in non-clothing sales in North American and the opening of new stores in emerging markets.

The company, known for its distinctive red, black and brown plaid fabric, also remained upbeat despite concerns about a global economic downturn.

"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, jewelry and childrenswear," said Chief Executive Angela Ahrendts.

Burberry posted net profit of 135.2 million pounds ($267.5 million) in the year ending March 31, up from 110.2 million pounds a year earlier.

Revenue rose 17 percent to 995.4 million pounds ($1.97 billion) after the introduction of new products such as the metal-studded Knight handbag and the opening of stores in cities including Hong Kong.

The company's decision to branch out into goods other than clothing is paying off, with non-apparel sales increasing by 39 percent over the year and generating 32 percent of retail and wholesale revenue, up from 28 percent in the previous year.

The company launched a jewelry line for Spring/Summer 2008 and a new Burberry luggage is being tested over the Autumn/Winter 2008 season.

Burberry said it continues to invest in these new areas, adding teams for product development and sourcing.

Burberry Chief Financial Officer Stacey Cartwright said sales trends in stores were more volatile in the second-half of fiscal 2008, particularly in the last quarter, making it more difficult to spot trends.

Stripping out tax and costs related to the group's infrastructure revamp program, Burberry's adjusted operating profit rose 11 percent to 206.2 million pounds ($407.3 million), up from 185.1 million pounds a year earlier.

The company also benefited from a 15.1 million pound ($29.8 million) gain from the sale of its main office building in central London.

Despite the strong results, Burberry's shares fell 1.4 percent to 500 pence ($9.88). The stock has lost 11 percent of its value since the start of the year amid concerns about a tougher trading environment.

"Burberry's sales momentum should continue and outperform the broader luxury industry in 2008," said Citi, which has a buy rating on Burberry and 550 pence ($10.87) target price.