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Burberry not seeking Hong Kong listing as it beats target

Luxury group Burberry Ltd. said it was not seeking a listing in Hong Kong, dismissing recent speculation such a move was afoot, as it posted fiscal first-quarter sales above forecasts.

The maker of raincoats and leather goods, identifiable by their camel, red and black check pattern, said it did not need extra funds even though it was stepping up investment in new shops and refurbishments this year.

"There is no need to raise capital, there is no catalyst for us to be considering that (a Hong Kong listing)," finance director Stacey Cartwright told reporters in a conference call on Wednesday.

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Luxury brand Prada SpA last month floated successfully in Hong Kong in a move aimed at raising its profile in the region and cashing in on China's voracious appetite for luxury goods.

Burberry said it planned to open 20 to 25 shops this year, slightly more than last year, while refurbishing a number of flagship stores, including two in London.

Sales generated by Burberry's retail network, which contributes 66 per cent of turnover, rose nearly 50 per cent in its first quarter to June, a performance that puts it at the top of the luxury sector.

Mr. Cartwright said the brand had benefited from strong growth in Asia and solid trading in France and Germany.

Burberry shares rose sharply on Wednesday, having reached a fresh high last week together with other luxury stocks such as Hermès SA and LVMH Moët Hennessy Louis Vuitton SA , driven by investors' anticipation of strong first-half results.

In contrast, shares in French cosmetics maker L'Oreal, which makes Lancome lipstick, Biotherm creams and Garnier shampoos, were down 4 per cent after it posted disappointing second-quarter sales, hurt by a slowdown in North America, Latin America and eastern Europe.

L'Oreal's core business is mass consumer goods while Burberry's main products are handbags and raincoats, for which demand is strong, particularly in emerging markets.

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The 155-year-old Burberry group has seen its shares rise fourfold over the past two years on the back of a successful turnaround, and recurring speculation it could be acquired.

Investors have been piling money into luxury stocks, attracted by fast-growing demand from Asia and luxury companies' ability to raise prices to pass on higher raw material prices without affecting demand.

Analysts said the share price increase was also due to the British brand's raised expectations for its wholesale operations, bolstered by the Americas, emerging markets and travel retail.

Thanks to higher-than-planned in-season orders, Burberry said it expected wholesale revenue excluding China to increase by a high-teens percentage at constant exchange rates in the first half, up from its previous forecast of mid-teens growth.

"The U.S. has performed very strongly within that wholesale guidance number. We believe we continue to outperform versus many of our luxury peers there," Mr. Cartwright said.

Burberry added it expected a percentage gain for licensing revenue in the current year to March in the mid-single digits.

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The Pictet Premium Brands fund has reduced its stake in Burberry on the back of the strong share price performance but the stock remains one of its top five holdings, fund manager Laurent Belloni said.

"We will definitely keep it. We like the retail strategy – expansion of the brand in Asia, buyout of the licence in China. Again the results have been above expectations, again the stock is up," he told Reuters.

Some analysts said they did not expect to raise their earnings expectations for the year significantly on the back of the company's upbeat trading update.

"With expectations of high cost inflation in the business, we could expect only modest earnings upgrades for the current year," Mr. Citi said in a note.

Overall, Burberry revenue rose 34 per cent on a comparable basis to £367-million, above expectations for £345-million.

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