LONDON — Expenses tied to retail expansion and a cost-efficiency program unveiled earlier this year reduced profits at Burberry Group plc by 24 percent in the six months to Sept. 30, but the bullish company hiked its dividend based on the strength of the business.
The company said Tuesday that profits fell to 56.8 million pounds, or $90.3 million, from 74.8 million pounds, or $118.9 million, as Burberry continues to spotlight retail over wholesale distribution.
As reported last month, revenue in the first half rose 6.1 percent to 572.4 million pounds, or $910.1 million, from 539.1 million pounds, or $857.2 million, boosted by favorable exchange rates and nonapparel, which was the strongest performing division in the half. At constant exchange rates, however, revenue would have fallen 5 percent.
Retail sales accounted for 54 percent of revenue in the period, compared with 45 percent last year. In May, Burberry had anticipated the increase in operating costs as the company continued to shrink its wholesale business. All figures have been converted from the pound at current exchange.
Burberry chief executive officer Angela Ahrendts called the results “solid,” and said the company was entering the second half with confidence. She was upbeat in a telephone interview Tuesday: “We don’t typically raise the dividend midyear, but the board felt so strongly about the company’s momentum that it went ahead. They love what we are doing with the brand, and they wanted to reaffirm their confidence in the Burberry business.”
The interim dividend at Britain’s biggest luxury goods firm, which is now a FTSE 100 company, increased 4 percent to 3.50 pence, or $5.57.
As a result of the increasing emphasis on retail and strong, full-price sales, Ahrendts said gross margin had outstripped expectations.
Burberry said it expects gross margin to improve further in the second half, thanks to the increased number of retail outlets, tighter inventories, higher full-price sales and greater cost efficiencies.
Net cash on Sept. 30 was 56.3 million pounds, or $89.5 million, compared with net debt of 114.3 million pounds, or $181.7 million, on the same day last year. Ahrendts said the positive swing was due to a 40 percent drop in inventory.
Meanwhile, Burberry’s cost-cutting program, which resulted in the closure of the Thomas Burberry collection this year, infrastructure efficiencies, the shuttering of six stores and a reduction in head count by more than 1,000 people, cost the company 4.2 million pounds, or $6.7 million, in the period. The program will generate 50 million pounds, or $79.5 million, in savings for the year, the statement added.
In other news, Burberry said it was pushing further into underpenetrated markets. The company said it is in the process of establishing a joint venture in India, it has signed new franchise agreements in Lebanon and Mongolia and it continues to invest in North America. In the U.S., Ahrendts said Burberry is always looking to exploit real estate opportunities.
“The 57th Street store renovation was not in our original plan, nor were the two new stores, which open next week at 444 Madison,” she said. “We are always looking for favorable terms and to optimize our brands and our opportunities.”
Burberry will open the first freestanding concept stores for Burberry Brit and Burberry London on the ground floor of the new Madison Avenue headquarters. Both units had been empty, and each spans 1,500 square feet.
Burberry has beefed up its apparel license with Sanyo Shokai Ltd. and Mitsui & Co. Ltd. in Japan, cutting short the term of its agreement by five years and boosting production and royalty payments. In Japan, Burberry has also formed a nonapparel joint venture, which it views as a major opportunity to distribute its global accessories collection in the country and gain market share in nonapparel.
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews
“Stranger Things” is getting a new cast member for season 2. Meet @sadiesink_, the 15-year-old who will be joining the Netflix series for its new season. You may recognize her from “The Glass Castle” with Brie Larson and Woody Harrelson, but the Texas native’s next role goes in an entirely different direction. She describes her character, Max, as “a rough and tumble skater girl [who] becomes friends with the boys at school.” The second season debuts on October 27. (📷: @jgreenery) #wwdeye
Amid the Harvey Weinstein controversy, there’s another sector that’s being put under the spotlight for sexual abuse: the modeling industry. While rumors about abuse and sexual harassment of female and male models — and the photographers, agents and others who perpetrated it — have circulated within the fashion world for years, model @cameronrussell started posting stories from models on Instagram last week about abusive situations they’ve encountered — from sexual harassment and molestation to attempted rape. Over 75 have weighed in so far. Read more on WWD.com. Link in bio. #wwdnews
To celebrate its 16th anniversary, @dylanscandybar tapped designers and celebrities to create mosaics out of candy. The mosaics will be auctioned off to support the philanthropic cause of each participant’s choice. Pictured here is the mural created by @aliceandolivia's Stacey Bendet. For a first look at some of the other artwork being unveiled tonight, go to WWD.com. #wwdeye
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye