Burberry performs despite difficult economic environment

As Burberry reports positive half year results, Helal Miah, investment research analyst at The Share Centre, explains what they mean for investors.

"This morning, Burberry reported first half profits that were slightly ahead of analyst estimates with adjusted profit before tax increasing to £173m, up 6% versus the same period last year. Total revenue grew 8% to £883m with the retail division up 10% and accounting for £557m of total sales. These figures come against a challenging economic environment where a number of luxury good producers have either reported weaker sales or downgraded their earnings estimates for the full year.

"Looking forward, investors will be pleased to hear the company believes it is solidly positioned for the second half of the year and continues with its retail expansion objectives, with average retail selling space set to expand by around 14%.

"The group's wholesale customers are generally more cautious and although wholesale revenue is set to remain broadly unchanged at roughly £230m, growth is expected from the US, emerging markets and Asian Travel retail. However, Europe is set to remain weak, especially in the south.

"Planned capital expenditure remains between £180-£200m and Burberry is looking to operate a new fragrance and beauty division which is not expected to turn profitable until 2014.

"We continue to recommend investors ‘hold' Burberry as the economic environment remains challenging and we consider the current price to earnings level a little high. Mulberry remains our preferred play in the luxury goods segment of the market for higher risk investors looking for longer term growth, as we believe there is more potential growth in the share price."

For more information, visit share.co.uk.