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Burberry dips on profit taking and weak US sales, but FTSE continues to climb

Luxury goods group reports 21% rise in third quarter revenues, but US performance disappoints

Luxury goods group Burberry is leading the market fallers despite what appears at first glance to be a positive trading update.

The company reported a 21% rise in third quarter revenues, with strong growth in China helping to offset the weakness in European and American markets. Retail sales rose 23% while wholesale revenues jumped 23%.

But with a spate of profit taking, Burberry’s shares are down 25p at £12.75, a near 2% decline.

There were a couple of cautious notes in the statement too. Burberry said it expected “mid single-digit” percentage revenue growth in the wholesale division in the second half, which points to a slowdown. And chief executive Angela Ahrendts talked about “long term sustainable growth” while also commenting on the current challenging economic environment. Analysts were also unimpressed by 4% growth in the US during the third quarter. Simon Irwin at Liberum Capital said:

There was nothing wrong with the overall numbers. However the poor performance in the US and the weak fourth quarter guidance may worry the market. We still believe that Burberry has sufficient self help to outperform peers and deliver good results in a slowing environment.

He, like most other analysts who follow the business, has a buy recommendation on Burberry.

Overall the market continues to shake off nerves about the continuing eurozone crisis. There was a sense that Monday night’s downgrade of the European bailout fund’s credit rating by Standard & Poor’s was inevitable, given Friday’s cuts to nine European countries.

So ahead of more bond auctions – in particular Spain – and more talks to attempt to resolve the stand-off between Greece and its bond holders, the FTSE 100 continues to gain ground. It is currently 59.54 points higher at 5716.98, with investors looking towards UK inflation figures imminently and a speech by Bank of England governor Mervyn King.

Royal Bank of Scotland is 1.02p higher at 25.44p after it sold its aircraft leasing business to Japan’s Sumitomo for .3bn. Shore Capital moved from sell to hold, with analyst Gary Greenwood saying:

We welcome the company’s decision to shrink its riskier investment banking operations further by exiting loss making equity and advisory businesses and de-emphasising the more capital intensive fixed income operations. Although this restructuring could be costly in the short-term, we believe that it will prove to be a sensible move over the medium to long-term, boosting both return on equity and capitalisation.

Elsewhere Dixons Retail has risen 0.81p to 10.7p despite a 5% fall in sales in the 12 weeks to January 7. The figure, which includes the key Christmas period, was in line with expectations.

CSR, the chip company, has climbed 13.6p to 220.6p after JP Morgan Cazenove moved from neutral to overweight. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds