LONDON — Revenues at Burberry rose 23.3 percent to 254 million pounds, or $519.6 million, from 206 million pounds, or $394.6 million, in the third quarter, boosted by growth across all product channels and geographic regions.
Growth drivers in the three months ending Dec. 31 were luxury accessories, including footwear, and outerwear from the Prorsum runway collection. The U.S. and emerging markets continued to fuel sales growth.
In an interview Tuesday, chief financial officer Stacey Cartwright called the quarter's growth "phenomenal," but acknowledged there had been some challenges during the period. Retail sales came in "modestly" behind plan due to increased markdowns during the Christmas period, compared with last year.
Also, the Spanish market was weak: Retail sales there declined year-on-year in the quarter, and the company said wholesale revenues are expected to show further weakness.
"Spain is one of the trickiest markets across Europe right now, but not just for us. There are problems with the economy and the housing market. Also, we are positioned there as a better — and not a luxury — brand," she said.
Investors on the London Exchange keyed in on the weakness in Spain and below-plan holiday sales, sending shares down 16.4 percent to a new 52-week low. During a conference call with analysts early Tuesday, Cartwright said that Burberry was still aiming for full-year, pre-tax profits of 210 million pounds, or $420 million, but that the company would now be "stretching" to meet that target. It was by no means a profit warning, however. She said the stretching would be due chiefly to the markdowns during the holiday season mentioned in the third-quarter trading statement.
Later in the day, one analyst said the market had been "unusually harsh" on Burberry and expected a share price correction later in the week.
The third quarter was a strong one, nonetheless, and Cartwright added that Burberry continues to reaffirm and build on its luxury market position worldwide. Retail revenues rose 12 percent to 161 million pounds, or $329.3 million, from 144 million, or $275.9 million, while wholesale revenues rose 72 percent to 74 million pounds, or $151.3 million, from 43 million pounds, or $82.4 million. All currency conversions were made at average exchange rates for the periods to which they refer.Wholesale growth, Burberry said, came from new and earlier deliveries, including October gift and spring accessories collections. For the second half, Burberry raised its wholesale growth target to 20 percent from the mid-teens, with nearly half of that growth expected to come from Europe and North America.
Regarding wholesale, the company said it had growing confidence in its ability to deliver on a more timely basis to stores, following the implementation in September of its new IT system for shipping. Burberry is in the throes of overhauling its company-wide IT system.
Licensing revenues remained broadly flat at 19 million pounds, or $38.8 million. The company said the weakness of the yen would likely reduce reported revenues and profits by about 6 million pounds, or $12.3 million, in the full year.
A new fragrance, Burberry The Beat, will be launched during the fourth quarter by Inter Parfums, and Burberry's new fashion jewelry line will make its debut at retail over the next few months.
In a research report published Tuesday, Melanie Flouquet, an analyst at JP Morgan in London, said the third-quarter results were "better than expected," with wholesale sales the big positive surprise. Flouquet said, however, that the U.S. market "will unlikely remain buoyant for luxury, even for the less-penetrated European brands."
Cartwright said that, while Burberry was not immune to macroeconomic conditions or talk of recession in the U.S., the company was upbeat about growth prospects.
"There is growth opportunity for us because there is a huge amount of underpenetration. We are playing catch-up in so many markets," she said. "We are outperforming our peers and seeing 40 percent growth in our U.S. wholesale accounts; shoes are growing into a major new category, and emerging markets are generating the highest like-for-like sales for us anywhere in the world."
To wit, Cartwright said the company would be opening 15 to 20 franchised stores in 2009 in emerging markets such as Russia, India, China and the rest of Asia. Hong Kong, Burberry added, remains the strongest market within Asia.
@margotrobbie steps out onto the red carpet wearing @miumiu. The actress is nominated for “Outstanding Performance by a Female Actor in a Leading Role” in “I, Tonya” at the #SagAwards. (📷: Stewart Cook) #wwdfashion
For @massimogiorgetti of @msgm, the Nineties are his favorite decade. “They had a huge impact on my personal growth. What I like of the Nineties is that they are not so precise in terms of style as other decades…there was actually a bit of everything,” he said. As seen on MSGM’s Spring 2018 show: tie-dye and a bit of grunge, two styles that are synonymous with the decade #wwdfashion #wwddecades (📷: @kukukuba)
Breaking News: @hedislimane joins @celine as its new artistic, creative and image director. One of fashion’s preeminent image-makers and trendsetters, Slimane is to join the LVMH brand on Feb. 1 and unveil his first fashion proposition for men and women next September during Paris Fashion Week. It marks a major homecoming for Slimane, who cemented his reputation – and influenced men’s tailoring for more than a decade – as the designer of Dior Homme between 2000 and 2007. He went on to reinvent and ignite the house of Yves Saint Laurent, which he rechristened Saint Laurent, between 2012 and 2016 – all the while maintaining a close relationship with the Arnault family, which controls LVMH and Dior. Read the full exclusive story on WWD.com. Link in bio. #wwdnews #wwdfashion
“Personally I believe the Eighties have been the richest and more vivacious period for international fashion,” Giorgio Armani said when asked what his favorite decade of fashion is. It was a moment of disruption and experimentation and only thinking back to the first years of that decade is always an emotion for me, for what they have meant to me and my work.” The influence is clear in @giorgioarmani spring 2018 collection, pictured here, which was full of bright colors and unexpected prints. Read more about which decades designers loved most on WWD.com #wwdfashion #wwddecades (📷: @aitorrosasphoto)
For Lady Gaga’s only Italian show on her “Joanne World Tour,” the singer wore a range of @versace_official outfits. The standout piece: this custom-made bodysuit inspired by the brand’s spring 2018 collection. #wwdfashion (RG: @ladygaga)
@_camillaruth_ is expanding on the wellness-craze concept with @westbourne – a new NYC restaurant that’s both a healthy-minded café as well as a business that gives back to the community. Marcus works with the Robin Hood foundation to give back to The Door, a non-profit providing youth development services, and also hires employees through The Door. Read our full interview with Marcus on giving back through food on WWD.com. #wwdeye (📷: @lexieblacklock)