CORRECTED – UPDATE 3-Chinese shoppers and coat sales boost Burberry

(Corrects surname of CEO in paragraph 14)

* Full-year profit seen in top half of expectations

* Q2 underlying revenue 359 mln stg vs forecast 358 mln stg

* Says material improvement in H1 gross profit margin

* Strong demand in China, Hong Kong, UK, France and Italy

* Shares down 3.7 pct, paring recent strong gains

(Adds company, analyst comments, detail, background, shares)

By Mark Potter

LONDON, Oct 13 (BestGrowthStock) – British luxury group Burberry
(BRBY.L: ) expects full-year profit to reach the top half of
analysts’ forecasts, after a 21 percent rise in first-half
revenue boosted by strong sales of coats and leather goods in
China and Europe.

The 154-year-old maker of raincoats and handbags said on
Wednesday its expansion in stronger growing emerging markets,
coupled with a surge in tourism from countries such as China,
would help it to cope with the austerity measures being
implemented in developing economies.

“We’re growing across a number of fronts and we think that
is standing us in good stead, irrespective of what the economies
throw at us,” finance chief Stacey Cartwright told reporters.

Burberry shares, up around 75 percent this year, fell over 3
percent as some analysts questioned whether the small profit
upgrade was enough to sustain such strong gains.

“While we see upside risks from a long-term, growth story,
we believe the short-term positive newsflow is largely priced
in,” said Citi analyst Thomas Chauvet.

Burberry, best known for its camel, red and black check
pattern, said revenue rose 12 percent at constant exchange rates
to 359 million pounds ($571 million) in the three months to
Sept. 30, excluding its restructuring Spanish business.

That was up from 282 million pounds in the first quarter and
compares with an average forecast of 358 million in a Reuters
poll of eight analysts.

Growth was driven by strong demand in China, Hong Kong,
Britain, Italy and France, with many of these markets benefiting
from a rise in tourist travel, particularly by the Chinese.

Cartwright said comparable store sales at Chinese stores
recently acquired from a franchise partner surged over 25
percent in the first half and Chinese shoppers were now the
group’s number one customers in many major cities, such as
London where they account for about 30 percent of all sales.

PROFIT MARGINS

Luxury goods firms have mostly enjoyed a strong 2010 so far
as the world economy moved out of recession. But moves in many
countries to rein in government borrowing, such as higher taxes
and spending cuts, have raised fears demand will slow again.

LVMH (LVMH.PA: ), the world’s number one luxury group, reports
third-quarter sales figures on Thursday.

Burberry weathered the recent economic downturn better than
many rivals thanks to a quick response which saw it slash costs,
jobs, stocks and ranges. It has since stepped up investment,
focusing on emerging markets, e-commerce and menswear, and is
reaping the benefits.

Its shares, which have been periodically lifted by bid
speculation, have outperformed the STOXX 600 European household
and personal goods sector (.SXQP: ) by about 45 percent this year.

Cartwright declined to comment on the bid rumours, but
denied reports chief executive Angela Ahrendts was looking to
move on, saying she was committed to the business as ever.

First-half gross profit margins rose by more than 400 basis
points, Cartwright said, adding the group was better placed to
cope with rising input costs than many rivals because it was at
an earlier stage of building a global supply chain.

Comparable store sales rose 8 percent in the second quarter,
down from 10 percent in the first, and Burberry forecast a 25
percent increase in selling space in the second half, with the
bulk coming from the acquired stores in China.

Wholesale revenues rose 21 percent at constant currencies
and excluding China in the first half, slightly ahead of company
guidance. It forecast 10 percent growth in the second half.

Analysts expect Burberry to make a full-year underlying
profit of 240 million to 270 million pounds, Cartwright said.

Burberry shares trade at about 25 times forecast earnings,
above LVMH on 21.7 and Richemont (CFR.VX: ) on 19.9, according to
Reuters data.
(Editing by Sharon Lindores and Louise Heavens)
($1=.6286 Pound)

CORRECTED – UPDATE 3-Chinese shoppers and coat sales boost Burberry