LONDON — Currency tailwinds and a new set of accounting measures helped to bolster the top and bottom lines at Burberry in the first half of fiscal 2020, despite double-digit declines in Hong Kong.
Profits for the six months ended Sept. 28 rose 14 percent to 150 million pounds, due in large part to the adoption of new accounting standards, IFRS 16, that recognize operating leases as assets and liabilities on the balance sheet. Stripping out the impact of the new measures, profits were up 11 percent.
Revenues in the period climbed 5 percent to 1.28 billion pounds on a reported basis due to currency movements and to “strong double-digit percentage” growth of chief creative officer Riccardo Tisci’s latest collections. At constant exchange rates, revenues gained 3 percent.
Burberry said by the end of September, the proportion of new product designed by Tisci was around 70 percent of the mainline retail offer, compared to 10 to 15 percent in March.
Those changes boosted comparable store sales growth by 4 percent in the first half, with the second quarter up 5 percent despite the double-digit declines in Hong Kong.
In retail stores, men’s apparel grew by a double-digit percentage and women’s apparel grew in the high-single digits as “full look” merchandising continued to drive strength in tops, trousers and skirts, Burberry said.
The trend in accessories was softer year-on-year, although the company said it improved “significantly” through the period with consumers responding positively to newly launched bags and a fuller assortment.
Overall growth on the shop floor was partially offset by replenishment lines, which were softer year-on-year.
At constant exchange, revenue growth was impacted by the closure of non-luxury wholesale doors in the U.S. as the company culls accounts in the region.
Burberry maintained its full-year guidance of broadly stable revenue and adjusted operating margin, despite the problems in Hong Kong. It will deliver 120 million pounds in cumulative cost savings, per previously announced plans.
By region, Asia-Pacific grew by a mid-single-digit percentage, with mainland China up in the mid-teens. South Korea grew in the high-single digits and Japan was up in the mid-single digits.
Burberry also said it has entered into an exclusive partnership with Tencent to develop social retail in China, with plans to pioneer a concept that blends social media and retail, “creating digital and physical spaces for engaged communities to interact, share and shop.”
The partnership will begin with Burberry opening a social retail store in Shenzhen in the first half of next year, powered by Tencent technology.