Luxury retailer Burberry is putting its faith in emerging markets as trade generally continues to be “volatile”.

This week Burberry revealed a joint venture in the Middle East with long-standing franchisee Jashanmal Group. The partnership, Burberry Middle East, will take advantage of the growth potential of the region, where like-for-like store sales have risen more than 40 per cent in the year to date.

Burberry Middle East will manage all Burberry’s retail and distribution in the region under a 15-year agreement.

Burberry chief financial officer Stacey Cartwright said that trade across the group is “very volatile right now”. Conditions have been particularly tough in the US.

In the six months to September 30, Burberry’s pre-tax profits increased 1 per cent to£97 million and group revenues rose 20 per cent to£593 million.

Since September retail sales have been ahead of last year, but down by a “mid-single digit percentage” like-for-like.

A new round of cost efficiencies will be announced in January with further “consolidation and rationalisation” across the group. Cost benefits from improvements to its supply chain, IT and infrastructure will deliver savings in the next financial year of£15 million to£20 million.

Burberry chief executive Angela Ahrendts said: “The fundamentals of Burberry remain strong, despite the very challenging environment.” She said the retailer’s “seasoned management” and strong brand credentials made her confident in long-term growth.

Citi analyst Thomas Chauvet said: “Burberry’s recent patterns of strong trading volatility, higher clearance levels and rising inventories are likely to persist around Christmas.”

Cartwright said that non-apparel, which grew 20 per cent in the period and now accounts for 31 per cent of sales, represents a growth opportunity. “The beauty of Burberry is that we have underpenetrated categories such as shoes and jewellery, and we will continue to see lots of growth in non-apparel.”

Burberry also announced a joint venture with Japanese licensing partners Sanyo Shokai and Mitsui & Co to develop the distribution of its non-apparel goods through retail outlets in the country.

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