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Burberry’s Bonanza: Luxe Brand Eyes Growth

Led by strong women’s wear and fragrance sales and aggressive retail expansion, Burberry reported a 75.3 percent surge in profits.

LONDON — The turnaround is over at Burberry and now the brand’s in growth mode.

Rose Marie Bravo, its chief executive officer who over the last six years has overseen the transformation of the British label from a dusty company known for trenchcoats to one of luxury’s major brands, said Monday that Burberry is entering its next phase.

This story first appeared in the May 25, 2004 issue of WWD.  Subscribe Today.

“In many ways, this is a new era for Burberry,” said Bravo, who joined Burberry in September 1997. “We’ve completed the turnaround, and now we’re hopefully in growth mode. There is a new energy, and new blood in the company, and I think that will provide good stimulation for the team.”

As noted, Brian Blake, a Gucci veteran, will join Burberry on June 1, in the post of worldwide president and chief operating officer. Stacey Cartwright joined in March as chief financial officer. Blake and Cartwright will be members of the Burberry executive committee along with Bravo.

Bravo made her comments as Burberry reported profits surged 75.3 percent for the fiscal year ended March 31 on the back of strong women’s wear sales, aggressive retail expansion, and the launch of the Burberry Brit fragrance last fall.

For the year-end period, Burberry posted net income that jumped to 91.5 million pounds, or $155.1 million, from 52.2 million pounds, or $80.7 million, in the prior year. Sales climbed 13.8 percent to 675.8 million pounds, or $1.15 billion, from 593.6 million pounds, or $917.8 million. Dollar figures have been converted at the average exchange rate.

And, with the launch of Burberry Brit for men today, it’s clear the luxury goods firm isn’t taking a breather.

The new face of the fragrance is British heartthrob Hugh Dancy, who stars in the film “King Arthur,” which will be released this summer. Dancy will also feature in Burberry’s fall 2004 ready-to-wear campaign.

Brand-wise, the fragrance is already off to a golden start: Burberry Brit for women, which launched in September, has already sold more than 100 million euros, or $122 million, at retail.

The current fiscal year is shaping up to be one of consolidation. In the statement, the company said operating margins would be “broadly consistent” with the 2003-’04 fiscal year, and licensing revenue growth will be “more moderate” compared with last year.

Sales, however, are expected to grow thanks to an 8 percent increase in retail space in the form of seven new stores and concessions. Wholesale sales are expected to grow in the high single-digits due to increased sales to existing customers.

“The fall order book is very strong, and the highlight is the women’s coat category,” said Bravo. “We see that as a big opportunity. We just had two trunk shows in New York and they were very successful. The numbers coming through are very good,” Bravo said.

While growth is expected in most major markets, the company said its expectations for the Spanish market are cautious because of the March 11 bombings.

Going forward, Bravo said the big challenges include stimulating customer demand. “As the figures get bigger, so does the competition,” said Bravo. “You constantly have to reinvent yourself, and that takes a lot of creativity.”

With regard to the fiscal year just ended, profits would have risen 31.7 percent to 91.5 million pounds, or $155.1 million, from 69.5 million pounds, or $107.5 million, not including the exceptional IPO charges from the previous year. Operating profit rose 54.7 percent to 136.6 million pounds, or $231.5 million, from 88.3 million pounds, or $136.5 million.

Sales across all regions, channels and product categories powered that growth.

Women’s wear was the leader with a 14 percent rise in sales to 225.7 million pounds, or $382.5 million, from 197.9 million pounds, or $305.9 million. The category now accounts for 33.4 percent of overall revenue.

Men’s wear and accessories are neck-in-neck in terms of sales volume, each generating about 28 percent of revenue.

Men’s wear sales rose 16.8 percent to 190.1 million pounds, or $322.2 million, from 162.8 million pounds, or $251.7 million. Accessories sales rose 11.5 percent to 189 million pounds, or $320.3 million, from 169.5 million pounds, or $262.1 million.

Wholesale sales rose 14.5 percent to 351.4 million pounds, or $595.6 million, from 306.9 million pounds, or $474.5 million, thanks in part to an aggressive push in emerging markets.

The financial report said in China, Burberry worked with local partners to open six points of sale during the year. There are 28 stores and concessions in 17 cities. Burberry also opened its first Russian unit, in Moscow with a partner, during the period.

Retail sales increased 12.7 percent to 257.4 million pounds, or $436.3 million, from 228.4 million pounds, or $353.1 million. Licensing revenue gained 14.9 percent to 67 million pounds, $113.6 million, from 58.3 million pounds, or $90.1 million. The company said the licensing highlight of the year was the launch of Burberry Brit fragrance.

By region, Europe accounted for the largest chunk of sales. There, sales grew 14.6 percent to 346.8 million pounds, or $587.8 million, from 302.7 million pounds, or $468 million. Europe’s performance varied by market, the company said, with continental Europe performing better than the U.K.

As reported, the U.K., which is suffering from a drop in tourist traffic due to threats of terrorism, began to pick up in March. In Spain, sales growth resumed, reflecting Burberry’s repositioning efforts in the region.

In North America, sales grew 15.6 percent to 162.4 million pounds, $275.3 million, while in Asia Pacific, they grew 10.6 percent to 162.6 million pounds, or $275.6 million.

In Asia Pacific, Burberry said regional growth was boosted by a “rapid rebound” in the Hong Kong market following the external shocks earlier in the year and an increase in visitors from China. Korea, on the other hand, was adversely affected by a difficult economic consumer and credit environment.

Overall, the firm opened nine stores during the year, and increased selling space by 12 percent. Three stores opened in the U.S.; one in Europe, and four in Asia. Also, Burberry opened an outlet store and four concessions.

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