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Burberry Posts Record Profit

Outerwear accounts for more than half of apparel sales at retail.

Burberry will have doubled its retail square footage in London by 2012.

LONDON — With emerging markets such as China, the Middle East and Latin America continuing to blossom, Burberry Group plc is turning its attention to more mature ones — and in particular to its hometown of London.


On Thursday, as the company reported record profits and double-digit revenue growth across all regions and product categories for the year ended March 31, Burberry laid out plans to upgrade its store network in markets such as London, Hong Kong and Chicago.

It has earmarked 180 million to 200 million pounds, or $292 million to $324 million at current exchange, in capital expenditure for the current year, with half of the money going to flagship openings and the remainder to refurbishments. Overall, retail space is set to grow by 12 to 13 percent in the 2011-12 fiscal year.

Some 20 million pounds, or $32.4 million, has been earmarked for London alone, where the company already has begun construction work. It plans to double the size of its Knightsbridge flagship, and move to a bigger, swankier address on Regent Street.

The stores will each be about 20,000 square feet, and chief executive officer Angela Ahrendts said Burberry will have doubled its retail square footage in London by 2012.

“The luxury sector is back in a very strong way worldwide — it is set to be up in the double digits in 2012 — and the opportunities for us in markets like London, Paris and Milan are glaring,” said Ahrendts during a joint conference call with chief financial officer Stacey Cartwright.

With regard to London she said: “A lot of our French and Italian peers have larger stores in our home market, so it’s an opportune time to invest here.”

The London stores, she added, attract a large number of international luxury shoppers from China, India, Russia and the Middle East and less than half of sales in London come from the domestic consumer.

Profits in the 12-month period more than doubled to 206.3 million pounds, or $321.8 million, from 82.2 million pounds, or $128.2 million, due to a 27 percent rise in sales, and record operating margins.

The company reported an adjusted retail and wholesale operating margin of 15.6 percent. That beat Burberry’s previous peak of 14.9 percent a few years ago, when sales were skewed toward wholesale.

Cartwright said the main drivers behind the margin growth were top-line performance, and the investment over the past five years in new SAP IT platforms that have given the company “more transparency, and the ability to plan and replenish stock. Put bluntly, we’re now able to run the business in a more efficient way,” she said.

Revenue grew to 1.5 billion pounds, or $2.34 billion, from 1.19 billion pounds or $1.86 billion. Figures have been converted at average exchange for the 12-month period. Burberry’s acquisition of its Chinese stores in September gave sales a boost in the year. In the current fiscal year, the Chinese stores will add 10 percent to selling space.

Burberry noted that outerwear contributed to more than half of apparel sales at retail, and nonapparel now accounts for 40 percent of retail and wholesale revenue. Nonapparel grew 35 percent thanks to robust sales of large leather goods.

“We’re past the ‘It’ bag styles and we’re selling men’s bags, women’s bags, the bags that Christopher [Bailey, Burberry’s chief creative officer] puts on the runway, the totes women wear to work and the styles that have become classics,” said Ahrendts during the call.

She added the company would soon be rolling out men’s accessories to all of Burberry’s stores worldwide.