Burberry bullish over China shops

Jul 17 2010 by Iain Laing, The Journal

BURBERRY has increased its focus on the Chinese market after agreeing a £70m deal to buy out its franchise partner in the country.

The move by the luxury goods group will enable it to implement its own customer services, marketing and IT strategy, as well as to open new stores, adding up to £20m to group operating profits in the 2011/12 financial year.

Chief executive Angela Ahrendts said there was already strong awareness of the Burberry brand, driven by its 50 stores in 30 cities.

She added: “We plan to drive productivity in existing stores and open new stores, while rapidly implementing our digital marketing initiatives.”

Nine of the stores are in Beijing and four are in Shanghai, contributing to total sales of £75m in 2009 and operating profits of £14m.

The move was welcomed in the City as Burberry shares rose 3%. Numis Securities analyst Nick Coulter said the company had secured a key distribution platform in a “high growth and increasingly wealthy Chinese market“, with the potential for more than 100 stores.

“This transaction again demonstrates the success of Burberry’s strategy to control the distribution of its product,” he added.