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Burberry Q3 sales better than expected as heritage trenches, ponchos demand pleases Bailey

UK-based luxury fashion house Burberry Group Wednesday reported a better-than-expected 8% rise in Q3 comp sales, underpinned by strong demand for its relaunched heritage trench coats and runway-inspired ponchos. Analysts had forecasts a 7% rise.

The group also reported double-digit growth in The Americas and EMEA, noting it achieved low single-digit growth in Asia as disruption in Hong Kong, partially offset a robust performance in mainland China and South Korea.

For the three months ended December 31, retail sales jumped 15% to £604m ($939.3m), or up 14% currency neutral. During the quarter, the company opened five mainline stores and closed four.

Burberry said there had been a modest improvement from exchange-rate movements since November, but that the benefit had been more than offset by the slowdown in Hong Kong and the change in the regional sales mix.

By product, the relaunch of heritage rainwear and cashmere scarves drove strong growth, reflecting the intensified focus in these core categories. In fashion runway-inspired ponchos saw exceptional performance.

Burberry said net new space would contribute about 5% to total retail revenue growth in fiscal 2015.

Burberry also maintained its outlook for full year wholesale revenue growth. Excluding Beauty, it still sees wholesale revenue at constant exchange rates to be down by a mid single-digit percentage in the six months to March 31, citing a more cautious approach from wholesale customers selling to the European consumer and in Asian travel retail markets. For Beauty, wholesale revenue is likely to improve by around 25% at constant exchange rates in fiscal 2015.

Licensing revenue for fiscal 2015 is anticipated to be broadly unchanged at constant exchange rates in both Japan and from global product licenses. At current exchange rates, reported licensing revenue will be reduced by about £10m because of the movement in the sterling/yen rate.

“Pleased” with the quarter’s “strong performance”, chief creative and executive officer Christopher Bailey said: “Looking ahead, we will bring equal focus to maximising the opportunities of the final quarter – including Lunar New Year – while being mindful of what remains a challenging external environment.”

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