LONDON — Burberry Group plc had a fragrant first half.
The British luxury goods brand said Wednesday that the success of its Burberry Brit for men fragrance contributed to an 8 percent increase in sales in the first six months of the fiscal year, to 347 million pounds, or $624.6 million, from 321 million pounds, or $577.8 million, in the corresponding period a year earlier. The success of its fragrances boosted licensing revenues during the period.
As noted, Burberry and Inter Parfums SA have extended their licensing agreement for another 12 and a half years, with an option to renew for an additional five years. The agreement came in the wake of the success of Burberry Brit for men and women, one of the industry’s hottest fragrance brands.
Under the new contract, Inter Parfums has doubled the royalty rate it pays to Burberry, and plans to spend more on the marketing of Burberry fragrances. There are also plans for Burberry skin care and personal care lines.
“It’s big news and very exciting for us,” said Burberry’s chief executive Rose Marie Bravo, who has extensive beauty retail experience. “It means more money spent on marketing, and that’s very encouraging going forward.”
Wednesday’s statement said Burberry Brit for men, which launched in selected markets in August, and the favorable terms of the new fragrance deal — some of which kicked in over the summer — contributed approximately 7 percentage points to licensing revenue growth in the six months ended Sept. 30.
The statement provided percentage increases and sales figures for the retail, wholesale and licensing businesses, as well as sales growth by region. The company will release full interim results, including profits, on Nov. 16.
Burberry’s results were more or less in line with analysts’ expectations for the first half. Retail sales rose 4 percent to 111 million pounds, or $200 million, from 107 million pounds, or $192.6 million, while wholesale sales rose 8 percent to 197 million pounds, or $354.6 million, from 183 million pounds, or $329.4 million.
Licensing was the star category, with revenue growing 28 percent to 39 million pounds, or $70.2 million, from 31 million pounds, or $55.8 million. The statement said about half of those gains came from Japan, thanks to a reduction in management fees and increases in certain royalty rates.
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All figures have been converted from the pound at current exchange.
In addition to the success of the Burberry fragrances, other licensed categories, such as watches and children’s apparel, performed well. The statement said Burberry expects second-half licensing revenues to be consistent with first-half ones.
“We’re generally pleased with the results,” said Bravo. “In the U.S., outerwear sales were not as robust as we would have liked, but Asia delivered great growth and Hong Kong continues to roar ahead thanks to the Chinese tourists. We also had a good spring-summer 2005 order book,” she noted, adding the company was expecting mid- to high-single-digit growth for the season.
Asia Pacific was the best-performing region with 29 percent growth in sales, followed by North America with 15 percent and Europe with 7 percent.
Retail sales accounted for 32 percent of total revenue in the period and growth was driven mainly by contributions from newly opened stores. Selling space increased by about 10 percent with store openings in the U.S. in King of Prussia, Pa.; Charlotte, N.C., and Scottsdale, Ariz. Burberry plans to open four stores and concessions during the second half, including a new store in Rome, and renovated ones in San Francisco and Paris.
The U.S. was not an easy market in the period: A combination of tough comparatives, renovation in key stores, and a slow start to autumn outerwear sales hampered sales growth, the statement said.
In Europe, continental markets continued to achieve strong growth, although the U.K. market was subdued in the half. South Korea achieved gains in the period, although the company said sales continued to be volatile as a result of the difficult macro environment.
Wholesale sales accounted for 57 percent of total revenue, with strong growth in the U.S. and Asia. Europe showed “modest growth” in the first half, the statement said.
Aaron Fischer, equities analyst at Goldman Sachs in London, said in a report on Wednesday that Burberry’s results were slightly better than the bank’s expectations and broadly in line with consensus.
“Overall, the numbers were good, but we see no reason to touch our full-year estimates at this point. The successful brand repositioning is translating into a strong growth platform to expand retail, move into new regions and expand the product offering into accessories,” he said.