Burberry plans to expand
UK luxury goods retailer Burberry is stepping up spending on new stores and upgrading existing ones take advantage of a boom in demand for luxury goods, it said on 26 May, 2011, as it met forecasts with a 39% increase in full-year profit.
The company said the investment would limit growth in profit margins in the coming year, sparking a retreat in its shares after recent strong gains.
Chief executive Angela Ahrendts said she was sure the spending would pay back in what she described as very strong recovery in demand for luxury goods, led by Chinese shoppers and tourists.
“It is time to get our retail footprint up to par with consumers’ perception of the brand,” she said, adding Burberry had spent the last five years improving the “back end” of the business, including its supply chain and technology.
The 155-year-old group said it would invest £180-200 million in 2011/12, up from £108 million in the year to end-March.
About half will go on new shops, including 20 in fast-growing emerging markets like Brazil, India and Mexico, with the rest spent on upgrading and expanding shops in flagship cities like Chicago, Milan, Hong Kong and Paris, as well as doubling selling space in the group's home city of London.
Burberry will spend £20 million extending its store in London’s Knightsbridge district, as well as relocating and extending its store on major shopping thoroughfare Regent Street.
“This is our headquarters. We should shine here greater than anywhere in the world,” Ahrendts said.
Burberry said the investment would hit operating profit margins in the first half of this financial year and the full-year increase would be “modest” after three years of strong gains to a record high of 15.6% in 2011/12.
