18% growth in six months as Asian markets spend.
The market for luxury goods is closely correlated with booming economies -- and right now, there's no denying most Asian economies are in better shape than the eurozone.
Published this morning, Burberry's (LSE: BRBY) second-half trading statement shows just how robust Asian economies remain. The fashion group's revenues soared to £1,027m in the six months to 31 March -- up an amazing 18% from the £830m registered in the preceding first half. Sales for the full year are thus £1,857m -- just £3m under the forecast £1,860m and an increase of 23% on 2011.
Although Burberry's shares are starting to look expensive, I think there is still a little more growth to come.
Burberry's retail revenues, which account for 72% of the overall top line, advanced by 23% during the last six months, and the group saw 12% growth in like-for-like store sales, led by flagship stores in the UK, France and China.
Burberry's wholesale revenues also gained, up 7% to £230m with double-digit growth in the USA, emerging markets and the Asian travel retail market.
The company has opened eleven new stores in the last six months, including new flagship stores in Paris and Taipei, and its Facebook fans have doubled in number to more than 12m over the last year. By way of comparison, fellow FTSE 100 brand Marks & Spencer (LSE: MKS) has just 651,000 fans.
Burberry believes that the next six months will bring more of the same; it's planning a 12%-14% increase in retail space and is expecting further double-digit growth.
On the face of it, there's no reason to doubt this forecast although expecting ever-increasing sales is always a risk -- especially as Burberry's margins need to remain intact for it to remain attractive and continue its four-year run of dividend increases.
Where will it end?
The recent story of SuperGroup (LSE: SGP) -- owners of the SuperDry brand -- illustrates just how fast a fashionable brand's share price can rise and fall. I don't think that Burberry's fate will be this dramatic, but it is inevitable that the group's level of growth cannot continue forever.
Despite this caveat, high-quality growth companies do have a habit of growing for longer than cautious investors expect, and I think that this will be the case with Burberry. Although these shares currently trading on a high forward P/E of 25, the PEG ratio -- a measure of growth in relation to value -- remains below 1 at 0.8. Many growth observers believe a PEG below 1 can indicate further share-price upside.
Burberry's shares dropped by 4.5% in early trading today, suggesting a round of profit-taking by existing shareholders disappointed Burberry didn't exceed their forecasts. But for my money, Burberry has further to go as a growth play.
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