Shares in Burberry soared more than 7% on Friday after the British luxury group said it had seen “strong rebound” in sales in the fourth quarter as the fashion industry starts to recover.
In an unscheduled trading update ahead of its March 27 financial year-end, Burberry BRBY, +6.07% said comparable store retail sales in the final quarter of its financial year are expected to be 28% to 32% higher than the same period a year earlier.
The FTSE 100-listed UKX, -0.20% group now expects group revenue for the full year to decline by 10% to 11%, and the adjusted operating margin to be in the range of15.5% to 16.5%. Analysts had predicted a sales decline of 13% and adjusted operating profit margin of 14.3%.
Burberry’s shares, which have risen close to 20% so far this year, were last up 7.5% at £21.35 in morning London trading on Friday.
Luxury goods brands, including Burberry BURBY, +1.64%, LVMH MC, -0.90% and Gucci-owner Kering KER, -0.10% have all benefited from continued strong performance in China, which has recovered faster than other economies from the economic disruption caused by the coronavirus pandemic, boosting the level of spending on high-end goods taking place on the mainland.
Italian fashion group Prada PRDSY, +3.55% said on Thursday its sales and profits rebounded at the end of last year, buoyed by a strong performance in China.
“Along with Prada’s positive current trading comments earlier this week, today’s Burberry announcement is further confirmation of supportive trends in Jan-March ’21, which is likely to read positively for the wider sector,” analysts at RBC Capital wrote in a research note to clients on Friday.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, cautioned that a disruption to tourism spending could see Burberry’s normal revenue patterns disrupted for some time. “The share price valuation is some way above the ten year average, so the market clearly has faith in Burberry’s potential. There’s no denying the view from Burberry HQ just got a little brighter, but there’s still work to be done,” she noted.
Burberry BBRYF, +6.62% will announce preliminary FY2021 results on May 13.