Burberry steps up investment as luxury booms

Burberry is stepping up spending on new stores and upgrading existing ones to cash in on a boom in spending on luxury goods, it said on Thursday, as it met forecasts with a 39% leap in annual profit.

The British maker of raincoats and handbags, best known for its camel, red and black check pattern, said it would invest 180-200 million pounds (USD 292-325 million) in the year to March 2012 on new shops and refurbishments in major cities like London, Paris, Chicago, Hong Kong, Shanghai and Sao Paulo.

That is up from 108 million pounds in the year just ended.

The global luxury goods market has continued a strong recovery from last year, defying fears it might be hit by austerity measures in Europe and steps to cool fast-growing emerging market economies.

Did you miss: Retail perspective: Is India ready for luxury shopping?

Earlier this month US consultancy Bain raised its 2011 growth forecast for global luxury sales to 8% from 3-5%, and executives were in bullish mood at Reuters' luxury summit this week.

"While mindful of the global macro challenges in 2011-12, Burberry remains confident in its strategies. With a strong financial position, Burberry will continue to invest for growth in the current year," the 155-year-old group said.

Profit before tax and one-off items jumped to 298 million pounds in the year to March 31, in line with company guidance that was raised last month.

Revenues climbed 27% to 1.5 billion pounds, helped by strong demand from Chinese shoppers and tourists.

Burberry said it ended the year with net cash of 298 million pounds and would pay a full-year dividend of 20 pence a share, up 43% on the year before.

It forecast a "modest improvement" in operating profit margin in 2011-12, following a record 15.6% in 2010-11, but said the margin was likely to fall in the first half of the year due to the higher investment.

Burberry shares have risen more than sevenfold over the past two and a half years, helped by speculation the group could be a bid target as takeover deals hot up in the luxury sector.

The stock closed at 1,320 pence on Wednesday, valuing the business at about 5.9 billion pounds.