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Brasilia prepares to welcome the luxury giant Burberry as it expands investments in Brazil

Burberry plans to expand its investments in new luxury markets in Latin America in a bid to strengthen its brand and a 23% increase in underlying profit in the year to march. The company’s chief executive said that it plans to optimize on the momentum of the brand and capitalize on its impressive and strong financial performance in the preliminary results for the full year ending March 2010.

 

The company will allocate £130 million to capital expenditure in the coming year, a rise of £70 million from the previous expenditure, including a 50% increase in spending on new stores. As such, the group plans to invest in 20 to 30 wholly owned stores this year with emphasis on Latin America and Brasilia has been targeted for some investments. The company recently opened its first store in the Brazilian capital and this, according to its CEO, was its start in the region.

 

The first store opened in Brasilia will be followed by an additional four stores in other parts of the country. Brasilia is particularly ideal for the company as a new market opportunity and in line with its cluster strategy, would increase stores in the region and other investments in other emerging new markets as well and the rolling out of new concepts stores too.  

 

The CEO announced the intended expansion plans as the company made a pre tax profit of £166 million compared to a loss of £16 million last year on sales that rose 6% to £1.28 billion.  The company attributed most of its losses in 2009 to £116 million of impairment charges it took from its Spanish operations. However, the venture into the Brasilia and other emerging markets in Latin America is expected to yield good returns for the company.

 

Burberry shares rose upwards by 46½p to 659p.Its retail division that operates its Burberry-branded stores and concessions was the only segment that witnessed underlying revenue growth with sales up 15% to £749 million in the year or an equivalent of 7% in like-for-like terms.  Even so, the Brasilia investment came with the closing of the company’s nine stores and the opening of 21 more others. With the retail segment accounting for most of its business, about 58% of all its sales, it remains to be seen how its foray into the Brasilia market will play out both in the short and long term investment periods.

May 28, 2010.