LONDON — On the eve of its first annual meeting since going public last summer, Burberry announced news that’s sure to put a smile on investors’ faces.
The company said in a first-quarter trading update Monday that total revenues in the three months ended June 30 increased 18 percent, with retail sales up 33 percent, thanks to a raft of store openings over the past year and last year’s acquisition of the Burberry distributor in Korea.
“We’re seeing the improvement that we had anticipated, and we’re on track for our full-year projections,” said Mike Metcalf, Burberry’s chief operating officer and chief financial officer. “March and April were nasty months, but in the first quarter, we performed in line — and maybe a little better — than expected.”
Revenues increased 17 percent on an underlying basis, excluding noncomparable operations such as new stores and its Korean distributor, and 22 percent at constant exchange rates. Total retail sales increased by 21 percent on an underlying basis, and accounted for approximately 53 percent of total revenue in the quarter.
Burberry’s wholesale business increased by 5 percent in the period, with underlying sales increasing 14 percent partially because of earlier shipments of fall merchandise. Metcalf added the company was expecting a wholesale increase as high as 8 or 9 percent across that division during the current second quarter, when most shipments are made.
Metcalf’s assertion that Burberry is on track for full-year projections referred to analysts’ expectations that Burberry will generate EBITDA of about $205 million for the full year, versus $192 million last year. Dollar figures have been converted from the pound at current exchange.
Metcalf said in a telephone interview the North American and Hong Kong markets had begun to spring back during the period. Indeed, the U.S. was the best-performing market in the quarter, while Europe remained soft.
“We saw very strong results in our U.S. retail division — and had a very strong June. I think shoppers were distracted in April — due to the war — but they appear to be getting back to shopping as normal,” he added.
Burberry didn’t provide revenue amounts or guidance on its earnings in the quarter. Those items won’t be provided until the firm issues interim results for the six months ending Sept. 30 on Nov. 18. A first-half trading update, similar to Monday’s for the quarter, is due on Oct. 14.
As for the Far East, Metcalf said Burberry saw an improvement in Hong Kong and Singapore. “Confidence is returning to the consumer, and we’re seeing the beginnings of recovery in the travel business. The mainland Chinese are back shopping in Hong Kong, and that’s important for us.”
The company said in the statement that Burberry is on track to increase its retail selling space by 10 percent during the current fiscal year. As reported, the company plans to open a Milan store in early September. Housed in a 17th-century building, the Burberry unit on Via Verri will span 8,100 square feet and be a one-of-a-kind design.
Metcalf said accessories sales were “a couple of points off” the company’s expectations. Women’s wear was steady, and men’s wear was up 1 percent. He said the best sellers were shirts, polo shirts, ties and casualwear.
Total licensing revenues in the quarter increased by 4 percent, and 7 percent on an underlying basis.
Meanwhile, Burberry’s annual meeting, the first since its listing on the London stock exchange last year, might not be purely celebratory.
The National Association of Pension Funds has been critical of the pay given to Burberry executives — claiming the packages are too generous by U.K. standards. It is suggesting that shareholders vote against the proposals.
As reported, Burberry chief executive Rose Marie Bravo took home a total of $9.2 million in the 2003 fiscal year — including a bonus that amounted to 86 percent of her base salary.
However, there is no danger of those packages being voted down, as Great Universal Stores still owns a large controlling stake in Burberry. And it’s no secret that institutional shareholders view Bravo as key to Burberry’s current — and future — success.