Luxury brand Burberry expects to post second half profits in line with market expectations after underlying sales rose 2% to GBP663m (US$961m).

The UK company said sales were up 21% on a reported basis in the six months to 31 March.

The 2% underlying rise followed increases of 13% and 9% in the first half and third quarter respectively.

Burberry also said that margins had come under greater pressure than previously expected, with a lower proportion of sales made at full price during the period.

Retail revenues in the second half were up 14%, boosted by stronger fourth quarter performances in the US, Europe and Spain, the company said.

However, wholesale revenues were down 11%, and are expected to plummet 25% in the first half of the next financial year, with retailers reducing orders in the teeth of the downturn in retail spending.

Licensing revenue was also down 13% in the period, and is expected to decline 10-15% in 2009/10.

But Burberry expects 2008/9 profits to be in the middle of market expectations, currently at about GBP162-185m.

"Burberry made good progress in the second half," said CEO Angela Ahrendts. "During the period, we intensified innovation in core outerwear and accessory categories, continued to improve inventory management and advanced execution of our cost efficiency programme.

"Entering the new year, we believe the Burberry brand and operations are well-positioned to capitalise on available opportunities, with the goal of delivering sustainable long-term growth."