LONDON — Burberry Group PLC posted a strong first half, with sales in all product categories and geographic regions on the rise, but it’s paying the price for going public.
Net profit in the six months ended Sept. 30 slid 36 percent to $25.3 million from $39.3 million due to exceptional charges linked to Burberry’s initial public offering in July. However, the company said those charges will have no cash impact and no impact on the company’s net asset value.
The firm said in a statement Tuesday that excluding the exceptional costs — chiefly attributable to an employee share-ownership plan — profit after taxation would have been $52.6 million, representing a 34 percent rise over the corresponding period last year.
Sales for the six months rose 15 percent to $432.4 million from $375.1 million. Excluding currency fluctuation and the impact of Burberry’s recent acquisitions in Asia, sales would have risen 9 percent.
This is the first time that Burberry has released detailed first-half results as a publicly listed company. Dollar figures have been converted from the pound at current exchange rates.
Rose Marie Bravo, chief executive, said she was pleased with the results. "Under the current market circumstances, we’re doing well and we’ve had a busy first half. We’ve opened three flagships, bought back our Asian businesses and done an IPO. Today’s results are a tribute to the Burberry team," she said.
Claire Kent, luxury goods analyst at Morgan Stanley, said the results beat her expectations. "The results were great, better than expected," said Kent, who had forecast operating profit, or EBITA — defined by Burberry as earnings before interest, taxation, IPO-related and other exceptional items, and goodwill amortization — of $79 million, while Burberry came through with $87.1 million, up 32 percent from year-ago levels.
"Burberry is bucking the general negative trend for the sector. Sales growth of 15 percent is very impressive in this kind of climate," Kent added.
Sales growth came chiefly from accessories and women’s wear, which both posted double-digit increases. Accessories grew by 26.2 percent to $119.3 million from $94.5 million, while women’s wear climbed 16.7 percent to $144.6 million from $123.9 million.Accessories now account for 28 percent of total volume, compared with 25 percent in the corresponding period last year. Bravo said the accessories growth spurt was due to the work of Pamela Harper, senior vice president for the category.
Women’s wear generates one-third of company revenue, the company said.
Men’s wear, meanwhile, grew at a slower rate — 6.3 percent —to $122 million from $115 million.
Another engine behind growth in the half was a boom in the number of retail outlets, which more than doubled in the period to 124 from 60. At the quarter’s end, there were 45 Burberry stores, 59 concessions and 20 outlet stores.
The company said that it expects spring 2003 wholesale orders to show single-digit growth over the prior year.
By region, Asia Pacific and North America reported double-digit sales growth, while Europe lagged behind. In Asia Pacific, sales rose 35.6 percent to $102 million from $75.1 million, boosted by the acquisition of Burberry’s businesses in Korea, Hong Kong, Singapore and Australia. In North America, sales grew 27.2 percent to $92.3 million from $72.5 million.
In Europe — Burberry’s biggest market, by far — growth was sluggish, as it has been for numerous firms feeling the sting of a slowdown in tourism and difficult trading conditions. Sales rose 3.7 percent to $235 million from $226.3 million. Burberry said Europe’s performance was due to soft domestic demand in Germany and reduced volumes associated with strategic repositioning in the Spanish market. However, Bravo said that the U.K. market is "superstrong."
Gross profit as a percentage of turnover rose to 55.7 percent from 47.8 percent, and the company said half of the increase was attributable to the Asia acquisitions.
The other half was due to a combination of reduced markdown expenses on excess stock, and higher gross margins.
Operating expenses as a percentage of turnover rose to 35.6 percent from 30.3 percent, reflecting expansion and investment across the business.
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