Reassuring update lifts Burberry

Burberry has reassured investors as high-spending luxury consumers helped the fashion house overcome a drop in footfall in its stores.

The group triggered a 20% drop in its share price last month after issuing a profits warning, giving rise to fears that China's demand for its luxury goods was in decline.

While shares have not fully recovered, the stock rose nearly 8% after the retailer - known for its red, black and camel check - revealed a 10% rise in underlying retail revenues to £577 million in the six months to September 30.

Burberry, which showcased its range at London Fashion Week during the period, said higher quality sales, such as its Prorsum range, offset a drop in customer numbers.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: "The underlying strengths of the company, which for the moment seem to have been dismissed by investors, remain intact and today's statement shows some strong underlying growth."

In a separate announcement, Burberry said its fragrance and beauty categories would now be directly operated following the end of its existing licence relationship with Interparfums.

The group, which has 198 retail stores, 215 concessions, 49 outlet shops and 62 franchise stores worldwide, reported a 3% rise in same-store sales. However, the quarterly breakdown showed the like-for-like performance slowing from 6% in the first quarter to 1% in the second.

Burberry said Hong Kong, France and Germany were robust, while the UK and China slowed in the second quarter.

Chief executive Angela Ahrendts said: "In a more challenging external environment, footfall declined but brand momentum remained strong, particularly with our higher spending luxury consumer.

During the first half, Burberry opened 13 mainline stores and closed seven. Openings were focused on flagship markets, including London's Regent Street, Hong Kong, Milan and Rome.