* H1 adjusted op profit 86.3 mln stg, vs 83 mln forecast
* H1 gross margin better than expected, but expenses higher
* H1 dividend up 4 pct at 3.5 pence a share
* Growth focused on non-apparel, retail, China and Americas
* Shares down 1.1 percent
(Adds more company comments, background, updates shares)
By Mark Potter
LONDON, Nov 17 Burberry (BRBY.L) is targeting
growth in non-clothing ranges like shoes and purses in the
economic recovery, the luxury goods group said on Tuesday, as it
posted a smaller-than-forecast fall in first-half profit.
The 153-year-old group, sketching out its plans for the next
three years, also said it wants to boost its presence in China
and the Americas and attract younger shoppers via social media
such as its recently launched artofthetrench.com Web site.
"While the last year or so has presented us as a management
team with the most challenging conditions we've ever had to work
through, we have been equally focused on how best to position
Burberry for superior growth when the global economy recovers,"
Chief Executive Angela Ahrendts told analysts on Tuesday.
Burberry declined to say whether the recovery was firmly
underway but said it was outperforming rivals and was confident
its trademark trench coats and handbags, as well as leather
goods, scarves and snoods would sell well this Christmas.
"We're very well positioned whichever way this goes," Chief
Financial Officer Stacey Cartwright told reporters, pointing to
big cuts in Burberry's inventory levels and also its ability to
buy in stock quickly.
"Clearly there's a momentum in the brand at the moment. We
want to make sure we don't miss a sale," she said.
Luxury goods firms have been hit hard in the recession. But
industry leaders LVMH (LVMH.PA), Richemont CFR.VX and Hermes
(HRMS.PA) have all recently reported signs of improving demand.
[ID:nLJ55709] [ID:nLD701185] [ID:nL5586738]
Burberry, known for its camel, red and black check, has
coped better than most in the downturn because it reacted
quickly by slashing costs, jobs, stock and range assortments.
Its recent collections have also received rave reviews.
Operating profit before one-off items fell 19 percent at
constant currencies to 86.3 million pounds ($145 million) in the
six months to Sept. 30, beating analysts' average forecast of 83
million pounds, thanks in part to cost cutting.
Cartwright did not expect analysts to raise their full-year
forecasts after they were lifted to about 190 million pounds
following a better-than-expected sales update in October.
The half-year dividend was up 4 percent to 3.5 pence a
Some analysts said the good news was offset by higher
operating expenses as Burberry invests in its retail business
and questioned whether it was running stock levels too tightly.
"Does Burberry have the supply chain to be flexible if
demand picks up?," JP Morgan analysts asked.
Burberry shares, which have more than reversed the 70
percent slide they suffered last year, were down 1.4 percent at
591.5 pence by 1230 GMT, underperforming a 0.7 percent decline
on the UK's benchmark FTSE-100 index .FTSE
Gross profit margins fell 30 basis points in the first half,
better than forecasts for a drop of at least 200 basis points
thanks to fewer discounted sales and to a cost-cutting programme
which has seen the group shed over 1,000 jobs.
The net reduction in staff, taking into account new store
openings, is about half that amount and Burberry currently
employs around 6,000 people worldwide.
Burberry said it expected gross margins to improve in the
second half, helped by lower stock levels which will reduce the
prospect of discounting.
CEO Ahrendts told analysts a key aim for the coming years
was for the group to double its non-clothing business, which
currently accounts for about a third of total sales, with a
focus on shoes and small leather goods.
Burberry, which has 122 stores, 255 concessions and 90
franchised shops, plans to increase retail selling space by 10
percent a year, including testing smaller-format stores, and
sees the potential for over 100 stores in China, she added.
It will also expand its wholesale business, particularly in
the Americas where it plans to double in size as well.
(Editing by Greg Mahlich and Erica Billingham)