Oct. 16 (Bloomberg) -- Burberry Group Plc, the luxury-goods maker whose founder created gabardine fabric, said second-quarter sales rose 9 percent as the company added metal-studded Knight handbags alongside its range of tailored trench coats.
Revenue climbed to 281 million pounds ($573 million) in the three months through September from 257 million pounds a year earlier, the London-based company said today. The stock fell as Burberry said it will spend about 4 million pounds more than planned this year to improve computer systems.
``This was a solid, although not flawless, trading update,'' Andrew Wade, an analyst at Seymour Pierce in London, wrote in an e-mailed note. He maintained his ``hold'' rating on the stock.
Chief Financial Officer Stacey Cartwright said accessories sales rose 35 percent in the fiscal first-half as the company introduced Knight bags for 1,595 pounds and Beaton styles for 1,095 pounds. Burberry opened 11 shops in the first half to add to revenue from its own outlets, which is more profitable than sales through wholesale customers such as department stores.
Burberry shares dropped 17.5 pence, or 2.6 percent, to 648.5 pence in London. The stock has added 20 percent in the past year, the fourth-biggest advance in the 14-member Bloomberg European Fashion Index, which has gained 11 percent.
Atlas Plan
The cost of installing new computer systems will be about 19 million pounds this year, more than Burberry's previous estimate of 15 million pounds, the statement shows. The company delayed introducing a factory warehouse system in September to avoid potential disruption of the large quantities of goods being handled, Cartwright said on a conference call.
Total costs of the so-called Atlas plan will remain at about 50 million pounds over three years, and about 20 million pounds will be added to profit as expected in fiscal 2008, Burberry said.
Cartwright said that the company is ``comfortable'' with analysts' estimates for earnings before interest and taxes of about 210 million pounds this year, before costs of the Atlas program, reiterating previous targets.
The second quarter sales figures were a ``positive surprise,'' said Nicole Quinn, an analyst at Morgan Stanley in London who gives Burberry stock an ``overweight'' recommendation. She singled out the 35 percent gain in accessories revenue.
Store Openings
Store openings expanded Burberry's selling space by about 12 percent in the first half as the company sought to catch up with Louis Vuitton, which has almost 50 percent more outlets. Burberry plans to open stores in Budapest, Copenhagen, Los Angeles and in Florence and Venice in Italy during the second half.
The U.K. luxury goods maker promoted more expensive outerwear styles, such as the studded trench coat singer Jennifer Lopez wore to Radio City Music Hall last month.
Cartwright said Burberry expects wholesale sales to rise in the ``mid-teens'' excluding exchange rates in the second half.
First-half sales rose 15 percent to 449 million pounds from 392 million pounds a year earlier, matching the median of five analysts' estimates compiled by Bloomberg. The performance was ``consistent with'' its annual profit forecast, the company said.
Revenue climbed 20 percent at the company's own stores and accounted for 45 percent of total sales, Burberry said. Wholesale revenue gained 14 percent. Store sales usually are stronger in the company's first and third quarters because wholesale orders are booked in its second and fourth quarters.
Revenue from licensing its name for use on goods such as perfume fell 3 percent in the half, according to Burberry, which outfitted Norwegian explorer Roald Amundsen's expedition to the South Pole in 1911.
Cartwright said the company expects to spend between 20 million pounds and 30 million pounds buying back its own shares in the second half after repurchasing stock worth about 40 million pounds in the first six months.
