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Burberry to check out IPO
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November 30, 2000: 10:18 a.m. ET
Catalog firm GUS sets float for luxury unit; valuation could be $2.9B
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LONDON (CNNfn) - Burberry, the luxury-goods maker most famous for black-and-tan checkerboard designs is set to go public after British catalog-retailing parent Great Universal Stores PLC said it would float the unit in the next 18 months.
A GUS spokeswoman said it would sell a maximum of 25 percent of Burberry. Analysts who estimated earlier this year the hats-and-scarves vendor was worth just £200 million to £300 million now say it could fetch up to £2 billion ($2.85 billion).
John Baillie, an analyst with SG Securities, called Burberry "the hottest luxury goods brand around" and said he has a "conservative" valuation of four times the company's annual sales -- meaning the brand was worth £2 billion.
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 CNNfn's Diana Muriel takes a peek at Burberry brand. |
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Still, another industry analyst said Burberry faces the challenge of defining its image in such a way as to avoid being bracketed with less highly valued apparel houses, such as U.S.-based Donna Karan (DK: Research, Estimates), which has a price-to-earnings ratio of about 9, and Ralph Lauren (RL: Research, Estimates), which has a P/E ratio of 13.
"The fashion business has relatively low barriers to entry," said John Wakely of Lehman Brothers, who said jewelry and leather-goods vendors often fetch higher market values. "While you could argue that Burberry's distinct check design gives it a barrier to entry, their challenge will be to position themselves not as a fashion brand, but a higher-end one." 
The IPO, which had been widely expected, comes at a time when many top luxury goods maker have been hoping to tap what they see as a possible windfall in the stock market.
"I think it will be a very interesting investment because it's at the very early stage of development and relaunch of the brand," said J.P. Morgan analyst Sagra Maceira de Rosen in a recent interview with CNN's Diana Muriel. "There's a lot of growth to come at Burberry's."
GUS (GUS) shares got a pop from the news, climbing 5-1/4 pence, or 1 percent, to 521.5, after climbing as high as 532.5 in earlier trading Thursday. At the previous day's close, GUS had a market value of £5.2 billion.
GUS has been under pressure to cash in on Burberry's growing popularity. Rivals such as Italian handbag vendor Gucci NV (GUC: Research, Estimates) and France's LVMH (PMC) are riding high on the stock market.
The announcement of the pending IPO came as Great Universal Stores, Britain's leading shop-at-home retailer, reported that pretax profit in its fiscal first half rose to £180.7 million before one-time items, taxation, and amortization of goodwill, from £176.1 million a year earlier.
Pretax profits at Burberry more than sextupled to £26.6 million, while sales more than doubled to £184 million.
-- from staff and wire reports 
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Great Universal Stores
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