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LONDON — After a bumpy 12 months and continued soft footfall at its mainline stores, Burberry Group ended the fiscal year on a high, beating analysts’ fourth-quarter estimates and returning to double-digit revenue growth.
Burberry said in a trading update Wednesday that fourth-quarter revenues climbed 11 percent to 503 million pounds, or $780 million, fueled partly by strong retail sales during the Chinese New Year, and store openings in the region.
Burberry’s fourth-quarter revenue was 2 percent above HSBC’s projection and 4 percent higher than the market consensus.
In the six months to March 31, revenues were up 8.7 percent to 1.12 billion pounds, or $1.76 billion. All figures have been converted at average exchange rates for the periods to which they refer.
Stacey Cartwright, Burberry’s outgoing chief financial officer and a company stalwart for nearly a decade, said the company saw a “strong finish” to 2013 with “good quality” sales in the retail channel.
The year has certainly veered to extremes: In the first quarter, revenue was up 11.2 percent; in the second it slowed to 2.6 percent and prompted what amounted to a profit warning in September, while in the third, growth picked up again, climbing 6.8 percent.
Cartwright said footfall remains weak for the luxury industry as a whole, but added Burberry is doing its best to persuade shoppers to buy higher-priced items. She said the company is endeavoring to “make the most” of the footfall it’s already attracting.
“We do think footfall in the luxury sector as a whole is down, and has been down for a number of months now — we started to call that out last summer. We think it’s more the aspirational luxury consumer who isn’t shopping as much,” said Cartwright during a conference call alongside her successor, Carol Fairweather.
Cartwright said the Burberry team is working to “nudge up” transaction values in store, and drive sales of the most expensive price points such as the outerwear, Prorsum and London collections. She said the strategy is “very much about focusing on what we can control in the store environment.”
It’s been nothing short of a challenge: The company said that trading continued to be “uneven” in the second half, with retail sales up 13 percent. Comparable-store sales grew by 7 percent, while new store space accounted for 6 percent of the growth.
However, unlike some of its competitors, such as Louis Vuitton, Burberry has not increased prices beyond the usual adjustments for duty, taxes and currency fluctuations.
“We are monitoring what is going on with our peers and with exchange rates. Where appropriate, we make small adjustments, but nothing significant, nothing aggressive,” Cartwright said.
There is no doubt that Burberry is looking for chances to trade up. “As we add more value into a product — such as leather or an exotic trim — we look at the opportunity to take it to the next price point,” the cfo said.
Sales in China drove growth in the fourth quarter, which Fairweather said was fueled by a lot of “red product” in the run-up to the Chinese New Year and a dedicated marketing campaign to coincide with the annual celebration. “We were very pleased with China in the quarter,” she said.
In the second half, the Asia-Pacific region posted the largest sales growth worldwide, 15 percent, compared with Europe, the Americas and the rest of the world, which all showed single-digit growth. The growth in Asia came specifically from double-digit gains in China and Hong Kong, while Korea remains weak, Burberry said.
Riding that momentum, Burberry plans to open three large-format stores in Shanghai in the current fiscal year to serve the domestic Chinese tourist and the Shanghai shopper. Burberry currently has 69 stores in 35 Chinese cities, and eight more stores — including the Shanghai units — will open in China this year.
Overall, retail sales now generate 75 percent of Burberry’s total revenue, compared with 40 percent seven years ago. All four product divisions — accessories, women’s, men’s and children’s — delivered double-digit growth in the half.
Wholesale sales were down 5 percent, as per the company’s guidance. Cartwright said that wholesale customers were “planning more conservatively” amid weak local demand in Europe in particular, while sales to North American department stores, Asia travel retail and emerging markets partners continued to grow.
The current fiscal year will be one of “consolidation” for retail, added Cartwright, with a net 10 new stores planned, and biased toward China and Latin America. The openings are set to contribute low- to midsingle-digit percentage retail growth in 2013-14.
Cartwright will leave the company after Burberry’s annual meeting in July. In response to a question during the conference call, she said she planned to take time off and was looking to move on to “a consumer-facing, chief executive role in 2014. But I’m in no rush to commit, and it will be at the end of the year at the earliest.”
Burberry shares closed up 1.8 percent at 12.89 pounds, or $19.74 pounds, after hitting a six-month high of 13.63, or $20.87, earlier in the day.