Riding the Asian Boom: Wave of Store Openings Planned by Luxe Brands

The luxury rush to Asia continues, with Burberry opening another flagship in Tokyo last week and plans to open up to 30 stores in China by yearend.

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“The Japanese market is one of the most exciting markets in the world,” Bravo added, then said she continues to be impressed with the sophistication of the Japanese consumers and their “great craving” for luxury and quality, along with their knowledge of brands.

She declined to comment on how much Burberry invested in the new store, but said it is “positioned at the highest level.” The company is working closely with its Japanese partners, Mitsui and Sanyo Shokai, to “give the market a vision of what the Burberry brand is around the world,” Bravo said.

James Hurley, the luxury goods analyst with Bear Stearns, said the key to the new store is it’s entirely funded by Burberry’s Japanese distribution partners, but the brand will have control over the merchandising and product.

Telsey said in her research note Monday that, although it is reasonable to expect Burberry to see its sales volume gains in Japan “naturally begin to moderate after strong double-digit growth over the last few years [during fiscal 2003, Burberry’s Japanese sales volumes rose an impressive 10 percent],” the luxury brand continues to “surprise on the upside.”

Telsey’s second-half, 2004 licensing revenue growth forecast “is consistent with the 10 percent growth that Burberry achieved in [the company’s most recently reported quarter]. Our growth in licensing revenue reflects the benefit of higher royalty rates in Japan, as well as the success of emerging licensed-product categories such as children’s wear, eyewear and fragrances.”

Japan isn’t Burberry’s only focus, however, Bravo said, pointing to the company’s plans to open more stores in China this year, with the goal of having more than 30 by the end of 2004. “So we have been very aggressive in many of the Asian markets,” Bravo said, then noted Burberry has recently opened two stores in Hong Kong, as well as new ones in Singapore, Kuala Lumpur in Malaysia and Australia.

Harrison of Financo said Burberry is a natural for the Chinese market. However, he questioned whether there were currently 30 locations that have the financial demographics to support a Burberry store, “but certainly, over time, this is something they can achieve.” Hurley noted Burberry is entering the Chinese market with local distributors, so it doesn’t have to invest its own capital if the program doesn’t work.
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