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Burberry Sales Climb 16.3% in Second Half

Men — and their gadgets — led to the bounce in sales, which hit 1.3 billion pounds, or $2.13 billion.

LONDON — Men — and their gadgets — led to a 16.3 percent bounce in Burberry sales, which hit 1.3 billion pounds, or $2.13 billion, in the second half of the year.

This story first appeared in the April 17, 2014 issue of WWD.  Subscribe Today.

Carol Fairweather, the company’s chief financial officer, said accessories was the fastest-growing category in the second half, and that men’s accessories grew at a rate of 20 percent, twice that of women’s.

“Men’s is a huge growth opportunity, and we are coming from a low base,” said Fairweather during a conference call on Wednesday. She noted that briefcases and digital accessories such as iPod cases were among the hottest items, although she declined to name the markets where men’s accessories performed the best.

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Overall, outerwear and large leather goods for men and women accounted for nearly half of Burberry’s growth in the period. The company also said that men’s tailoring, the women’s spring Prorsum collection and beauty performed strongly in the six months to March 31.

Burberry will release full-year results, including profit figures, on May 21.

Discounting currency headwinds, Burberry’s overall revenue growth was 19 percent.

Retail sales, which generate the bulk of revenue, advanced 10.5 percent to 928 million pounds, or $1.52 billion, in line with analysts’ expectations. At constant exchange for the six months, they climbed 13 percent.

All regions notched double-digit growth in the period at both constant and actual exchange.

Asia Pacific saw sales grow by 15.4 percent, led by China, while Burberry said the momentum in Korea is continuing.

The company said the beauty division, which is now in-house, generated 97 million pounds in revenue, or $159 million, in the half. In its first full year of direct operation, the division kicked in 144 million pounds, or $236 million, to overall sales, driven by the launch of Brit Rhythm for men and women fragrances.

Wholesale revenue in the division is set to grow by about 25 percent at constant exchange in the 2014-15 fiscal year.

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Fairweather said there are more beauty stand-alone concepts in the pipeline, following the opening of its test Beauty Box store in London’s Covent Garden. “We will be rolling out travel retail and beauty stand-alone concepts in wholesale and retail.” She reiterated that Burberry’s aim is “ultimately to become a top-10 player” in the industry.

Fairweather noted that the company was out to prove to its distributors “how we do things differently” in the beauty arena. She pointed to Burberry’s strategy of combining beauty and fragrance with fashion.

As reported, Brit Rhythm for women was promoted and linked with related merchandise from the fashion stable: The company created a one-off capsule collection of leather jackets, and customers will be able to buy the smoky-eye makeup worn by model Suki Waterhouse in the campaign and video.

At the time of the launch, chief creative officer and chief executive officer designate Christopher Bailey said that from now on, products such as “outerwear, bags and nail polish” would all be designed to work together.

The second half also had its share of ongoing challenges, namely currency woes. With regard to currency, Fairweather asserted that Burberry had no immediate plans to raise prices in order to counterbalance the adverse effects of the strong pound.

“No price rises are planned; the global pricing architecture we currently have in place is fine.” She added, however, that if Burberry’s competitors do increase prices, “we may move prices up, too. But right now, we don’t need to do anything differently. There will be no knee-jerk reactions to currency.”

In its statement, Burberry underlined the gravity of the currency crisis, saying that if exchange rates remain at current levels, the full impact on reported retail/wholesale full-year profit in 2014-15 will be “material.”

Burberry said that if it were to re-base its full-year 2013-14 retail/wholesale profits on today’s exchange rates, reported profits would fall by about 30 million pounds, or $50.2 million.

Footfall, meanwhile, remains soft at Burberry stores, but the company does not appear to be concerned — and is still building stores.

“We don’t mind whether our customers are buying online, in-store, or in-store via an iPad, which is counted as an online sale,” said Fairweather, adding that Burberry was also keen on converting window shoppers and in-store browsers into purchasers.

“Fewer people are going into the stores — this is a factor for the industry as a whole. But conversion is up, and digital is outperforming,” she said.

In the current year, Burberry said it plans to open about 20 to 25 mainline stores, and close between 15 and 20, with openings skewed to flagship markets and travel retail. The company said it plans to “evolve” the store portfolio in China and the Middle East in particular.

During the second half, Burberry opened 11 mainline stores and closed nine, while the same number of Holt Renfrew locations in Canada were converted from wholesale to retail concessions.