Burberry throws light upon European markets

Tuesday, 19 April 2011
Whereas FashionUnited Top 100 Index went up to 1,246.82, other international benchmarks such as Dow Jones or Hang Seng closed at down. The international fashion index benefited from Burberry’s good news. European stock indexes rose while Asian markets declined, following Monday's selloff in the U.S., which saw the Dow fall 140 points after credit-rating firm Standard & Poor's lowered its outlook on U.S. Treasury securities. Crude oil futures fell to just above $106 a barrel, while gold futures edged higher. The U.S. dollar lost ground against the euro but gained against the yen.

In the UK, shares of Burberry hit an all-time high Tuesday after the British luxury group reported a 30% rise in second-half revenue and said full-year pre-tax profit would be at the top end of market expectations, in a clear sign that its expansion in China is paying off.

The luxury clothing and accessories retailer said total revenue rose to GBP860 million for the six months to the end of March, up from GBP657 million a year earlier. Chief Financial Officer Stacey Cartwright said in a corporate statement she is confident that Burberry's progress, driven by strong growth in Asia Pacific and the Americas, means full-year pre-tax profit should come in at the top end of analysts' expectations, which range between GBP279 million and GBP300 million.

Burberry has extended its brand ownership over the past few years and added 50 Chinese franchise stores to its retail business in July 2010 at a cost of GBP70 million. The company now owns and controls its entire store portfolio in China, where same-store sales grew around 30% in the second half. "Burberry had a strong finish to the year, driven by our design, digital marketing and retail initiatives, as well as good early progress in China," Chief Executive Angela Ahrendts said.

Meanwhile, The Gap Inc. shares traded in the range of $21.46-$22.04 yesterday. The company has a market capitalization of 12.70 billion and 582.68 million shares outstanding. Goldman Sachs analysts recently downgraded shares of Gap from Neutral to Sell rating.

Elsewhere, American Apparel Inc. is racing to seal a deal for up to $10 million in rescue financing to avoid a bankruptcy filing, a person familiar with the matter told The Wall Street Journal.

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