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LONDON — Burberry is riding the retail wave to higher revenue.
Vigorous retail sales and a well-received spring collection drove up Burberry revenue 6 percent, to 390 million pounds, or $683 million, from 368 million, or $644 million, in the second half of the fiscal year ended March 31.
This story first appeared in the April 13, 2006 issue of WWD. Subscribe Today.
Burberry said in a statement Wednesday that revenue for the full fiscal year rose 5 percent, to 753 million pounds, or $1.3 billion, from 716 million pounds, or $1.25 billion, propelled by the company’s increasing roster of retail outlets.
“Retail operations were the highlight of Burberry’s fourth quarter,” Rose Marie Bravo, Burberry’s chief executive officer, who will step down on July 1, said in the statement. She will be replaced by Angela Ahrendts, who began working at the company in January.
“Consumers’ favorable response to spring merchandise, particularly women’s wear, and an exciting advertising campaign contributed to strong retail performance,” Bravo added, referring to the “Golden Moments” campaign to mark the 150th anniversary of the company.
Burberry, which did not break out its fourth-quarter sales, plans to release complete full-year results, including earnings, on May 25.
All currency conversions are based on current exchange rates.
Burberry’s chief financial officer Stacey Cartwright said in an interview that the 2005-’06 fiscal year was the “tipping point” for retail sales. The company has been focusing on building its retail channels and reducing wholesale ones. This year, retail and wholesale sales are almost equal, compared with 52 percent wholesale sales and 37 percent retail sales in the last fiscal year.
Burberry’s purchase of 12 retail locations in Taiwan last August, and its strategic shift from wholesale to retail channels in Spain, a major market for the brand, are bearing fruit. And Cartwright said that even stripping out revenue gains from the new stores, Burberry’s retail sales rose 6 percent in the fourth quarter.
“What we’re seeing is a real momentum building in our main, established stores,” she said.
In the current fiscal year, Burberry plans to pump up retail space by at least 10 percent, mostly in the U.S. and Asia. The company said first-half wholesale sales are up a “low-single-digit” percentage, based on orders for fall 2006.
Licensing revenue for the year is expected to be broadly flat against the corresponding period last year.
The second-half results beat many analysts’ expectations. Seymour Pierce in London called the figures “robust” in a research update on Wednesday, and HSBC in Paris characterized second-half sales a “positive surprise.”
Burberry said retail sales in the six months ended March 31 rose 27 percent, to 196 million pounds, or $343 million, from 155 million pounds, or $271 million.
The company added that new and refurbished stores in the U.S., including a new unit in Naples, Fla., drove sales growth in that market.
At retail, bestsellers in the period included outerwear (in what has so far been a chilly spring), the Prorsum Margaret handbag and the gold Waterloo fob watch.
As expected, wholesale sales in the six-month period dipped 13 percent, to 152 million pounds, or $266 million, from 174 million pounds, or $305 million, as Burberry moved away from wholesale channels. Sales in the U.S., Spain and the U.K. declined in the period.
However, emerging markets generated solid wholesale growth in the half because of five new franchises in places such as Abu Dhabi, United Arab Emirates; Cancún, Mexico, and Athens.
Income from licenses in the second half increased 5 percent, to 41 million pounds, or $72 million, from 39 million pounds, or $68 million, because of royalty rate increases in Japan, and global product licenses such as fragrance.
In the fourth quarter, Burberry launched a major new fragrance, Burberry London, which is entering most major consumer markets now. Cartwright said the fragrance campaign, which features Oscar-winning actress Rachel Weisz, has helped create a halo effect for Burberry sales overall.
For the full 2005-’06 fiscal year, retail sales rose 23 percent, to 325 million pounds, or $569 million, from 265 million pounds, or $464 million.
Wholesale sales declined 7 percent, to 347 million pounds, or $607 million, from 372 million pounds, or $651 million. Licensing revenue gained 4 percent, to 81 million pounds, or $142 million, from 78 million pounds, or $137 million.