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LONDON — Burberry Group plc was a top FTSE 100 performer on Wednesday after the group reported a 14 percent spike in third-quarter retail sales, outpacing analysts’ forecasts.
This story first appeared in the January 16, 2014 issue of WWD. Subscribe Today.
In a trading update for the three months ended Dec. 31, the company said retail revenue advanced 14 percent to 528 million pounds, or $856 million, at constant and reported exchange rates.
All figures have been converted at average exchange rates for the three months to Dec. 31.
Same-store sales were up 12 percent at constant exchange rates. Burberry’s shares closed up 4.6 percent to 15.37 pounds, or $25.22 at current exchange.
Not even a currency caveat from chief executive officer Angela Ahrendts could dent investors’ optimism. In the trading statement, Ahrendts said that at current levels “exchange rates will be a significant headwind in the second half and beyond, and the macro environment remains uncertain.”
During a conference call later in the day, chief financial officer Carol Fairweather said the more powerful pound would likely weigh on sales going forward.
She said that sales transacted in U.S. dollars and in currencies pegged to the dollar could ultimately be dented once they are converted into pounds.
The currency issue, she added, was a macroeconomic one, and Burberry remained focused on “controlling what we can control, and driving the underlying health and strength of the business.” She said the company would continue to invest in “top-line and quality bottom-line growth.”
Burberry also said it had increased its marketing budget during the quarter — although Fairweather would not say by how much — and put a powerful focus on customer service.
Burberry added three new languages to its site — Russian, Brazilian Portuguese and traditional Chinese — bringing the total number to 11, and increased its customer services staff by 30 percent.
“In our world, it’s all about service, and we need to deliver that wherever and however our customer wants to shop,” Fairweather said. “The global, traveling luxury goods customer wants that level of service from us, and we want to deliver it wherever they are.”
By region, Asia Pacific delivered double-digit growth in the three-month period, with Hong Kong, Taiwan and Macau performing strongly and China delivering double-digit comparative sales. In the latter case, Fairweather said Burberry may have benefited from the earlier Chinese New Year.
Fairweather said that Burberry will open its biggest Asia store — in Shanghai — over the next few weeks. The focus in China — and elsewhere — continues to be on flagship cities. She said Burberry will close smaller format stores in China when their leases come up in order to focus on larger formats that “properly showcase the brand.”
During the three-month period, the Americas and the EMEIA region (Europe, the Middle East, India and Africa) notched mid- to high-single-digit growth. The company said performance was “robust” in the U.K., France and Germany, while Italy remained weak.
During the third quarter, Burberry opened five mainline stores, including two in China, a fourth store in Mexico and the first Burberry Beauty Box in London. In addition, one store and two concessions previously operated by a franchisee were acquired in Thailand.
The main categories that drove sales were outerwear and large leather goods, which contributed approximately half of mainline growth, the company said.
Despite the continuing trend of soft footfall at the stores, Fairweather said Burberry’s flagship strategy remains unchanged. “Footfall has been weaker for the past few quarters in line with our peers, and there is no change to our flagship strategy,” she said.
“People come our stores to enjoy the Burberry experience, and then maybe they buy on the iPad, which is recorded as a digital sale. We don’t think in terms of online and offline, but about blending those experiences for the customer.” Burberry also said that during the three months, conversion to sales increased both online and offline.
Asked about more Beauty Box stores, the first of which opened last month in London’s Covent Garden, Fairweather said there are none in the pipeline yet. “It’s a test store to see how we can combine fashion and beauty. And it showcases the halo impact that one can bring to the other,” she said.
The company said its outlook for the year, and its current financial position, remain unchanged.