Burberry announces results of six months to 31 March 2013.
Highlights for the six months to 31 March 2013
-Total revenue £1,116m, up 9% underlying
Retail revenue £840m, up 13% underlying
- Retail now 75% of group revenue
- Comparable store sales up 7%
- Led by Asia Pacific, especially Greater China
- Double-digit growth in all four product divisions
- Outerwear, mens and digital outperformed
- FY 2014: low to mid single-digit % increase in retail revenue planned from net new openings
Wholesale revenue £220m, down 3% underlying, as guided
- Wholesale now only 20% of group revenue
- North America, Asia Travel Retail and Emerging Markets all up
- European specialty store rationalisation continued
- H1 2013/4: excluding Beauty, underlying wholesale revenue planned down about 10%
Licensing revenue £56m, up 3% underlying, consistent with guidance
- Helped by launch of The Britain watch and Body Tender fragrance
- FY 2014: excluding fragrance royalties, underlying licensing revenue expected to be slightly up
Further strategic and operational progress
- Ten stores opened including Chicago flagship and Knightsbridge mens store
- Strong brand momentum; Prorsum, London and leather bags outperformed
- Personalised product and marketing initiatives for Prorsum AW13 show
- 1 April 2013: integration of Beauty
Angela Ahrendts, Chief Executive Officer, commented:
“With three-quarters of our revenue now generated in retail, we are pleased with the 13% growth in this channel in the second half, driven by continued innovation in product, marketing and customer service, especially over Christmas and Chinese New Year.
Looking forward, while we expect the external global environment to remain challenging, the team is intensely focused on optimising the significant opportunities that exist for the brand across geographies and product divisions, with particular emphasis on unlocking the potential of our digital platform and our newly-integrated fragrance and beauty business.”
Retail
Retail sales, which accounted for 75% of total revenue in the second half, grew by 13% on an underlying and reported basis, benefiting from the consistent execution of key retail strategies. All four product divisions delivered double-digit growth, as did fashion and replenishment.
While trading continued to be uneven in the period, comparable store sales grew by 7% (Q3: 6%; Q4 8%), with the balance from new space.
Product, marketing and customer service initiatives drove strong performance in the festive periods in both the third and fourth quarters.
In mainline, footfall remained soft and was mitigated by improved conversion rates and higher average transaction values. Consumer preference was again weighted towards fashion and outerwear in Prorsum and London, where the penetration increased by four percentage points. Within the handbag category, leather and key shapes outperformed. Mens accessories and tailoring continued to perform strongly and the Spring/Summer womens Brit collection was well-received. Digital outperformed, enabled by investment in infrastructure, content and marketing.
By region, double-digit comparable store sales growth was delivered in Asia Pacific and Rest of World; Americas saw low single-digit growth and Europe was broadly unchanged. China and Hong Kong grew double-digit, while Korea and Italy remained weak.
During the second half, Burberry opened 10 mainline stores and closed two, bringing the total to 206 at the year end (a net increase of 14 in the year). Openings included the rebuilt Chicago flagship, the menswear standalone store in Knightsbridge, a further trial store in Japan and three additional stores in Brazil. Average retail selling space in the second half increased by 14%.
Wholesale
Wholesale revenue in the second half decreased by 3% underlying and 5% at reported FX, in line with guidance. Sales to North American department stores, Asia Travel Retail and Emerging Markets partners continued to grow. Europe, Burberry’s largest wholesale region, saw further planned account rationalisation and weakness in local demand, leading to a double-digit percentage decline in revenue. Globally, outerwear and mens performed strongly.
A net three franchise stores were opened in the second half, including a further two with Burberry’s new partner in the Baltic region.
Licensing
Total licensing revenue in the second half increased by 3% on an underlying basis (up 5% at reported FX). This performance is consistent with full year guidance of broadly unchanged revenue at constant and reported exchange rates, to give FY 2013 revenue of £109m.
Royalty income from Japan was down mid single-digit percentage as planned, reflecting continued rationalisation of Japanese accessories licences. Global product licences delivered strong double-digit growth, with product launches in the half including Body Tender fragrance, The Britain watch and the Splash sunglasses collection.
Burberry began directly operating fragrance and beauty from 1 April 2013 and has successfully assumed control of product development, sourcing, logistics and relationships with distributors worldwide. This business will form Burberry’s fifth product division, Beauty.
