Burberry pulls it out of the bag

As emerging markets prove vital to Burberry, Nick Raynor, investment adviser at The Share Centre, upgrades the retailer to a ‘hold' for investors.

"This morning, Burberry announced adjusted pre-tax profit of £298m up 39% and revenue £1.5bn up 27% for last year. This was largely driven by growth in emerging markets - particularly China where it has added 50 franchise stores since July 2010. Profits were also helped by better management of its stock as Burberry sold fewer items at sale prices.

"Going forward, Burberry plans to increase its retail space by 12-13% during 2011, focusing on China, Latin America and the Middle East. It is worth noting the retailer has said it will spend more on store openings in the first half of the year - which will impact figures.

"We are still cautious of the retailers' performance in previously traditional markets, such as the UK, Spain and Europe - but after another set of positive results, we have upgraded Burberry from a ‘sell' to a ‘hold'. Growth in emerging markets shows no sign of slowing down and we believe the luxury retailer will continue to profit from these regions for another 12 - 18 months.

"In early morning trading, the share price fell 2% and we would see any further weakness as an opportunity to build a holding in the retailer."

For more information, visit share.co.uk