Handbags drive Burberry's growth

Burberry's Knight bag is among its flagship products

The luxury goods company Burberry has reported rising profits despite what it calls "challenging times".

Pre-tax profits for the year to the end of March came in at £195.7m ($387m), 25% above the previous year's figure.

Burberry said its growth had been driven by sales of luxury handbags, including the £1,595 Knight bag.

The company warned in January that its full-year earnings would be below expected levels, partly due to spending on a major supply chain IT project.

Burberry chief executive Angela Ahrendts said the results, "demonstrate the robustness of our global luxury business in these challenging times, with consistent performance across our regions, channels and products".

She also announced that the company would nearly double its capital spending this year to between £90m and £95m in order to fund new stores, refurbishments, IT improvements and a new headquarters.