LONDON — Burberry Group plc began the fiscal year with a bang, notching a 30 percent revenue rise in the first quarter and outstripping analysts’ forecasts with a strong retail performance and robust growth in Asia.
This story first appeared in the July 14, 2011 issue of WWD. Subscribe Today.
Thomas Chauvet, European luxury goods analyst at Citi in London, sent out a report Wednesday morning, shortly after Burberry issued its results for the three months ended June 30. He dubbed it “Burberry Sales: At the Speed of Light,” and called the retail performance “impressive.”
However, he maintained a hold rating on the stock, which is currently trading at a 20 to 25 percent premium to its peers. “We think the stock is fully valued, as the full 2011-12 year could be one of transition, with high-cost inflation and limited earnings momentum,” he said.
Burberry’s shares on the London Stock Exchange gained 6.5 percent on Wednesday to close at 15.31 pounds, or $24.50. Burberry’s annual meeting is set to take place today.
Burberry said revenue in the first quarter rose to 367 million pounds, or $587.2 million, from 282 pounds, or $451.2 million, fuelled by double-digit growth across all regions and product channels.
All figures have been calculated at average exchange rates for the three-month period.
“We are pleased with Burberry’s start to the year, with double-digit growth balanced across retail and wholesale and all regions and product categories,” said chief executive officer Angela Ahrendts in the statement.
She said the team would continue to capitalize on Burberry’s British and outerwear heritage, develop its global retail presence and employ innovative digital technology, specifically marketing to the younger luxury consumer.
Retail sales grew 43.3 percent to 245 million pounds, or $392 million, from 171 million pounds, or $273.6 million, with outerwear and large leather goods contributing over half of revenue.
Some 20 percent of retail growth came from Burberry’s newly acquired stand-alone stores in China, which showed a year-on-year increase of 30 percent.
In an interview, Stacey Cartwright, Burberry’s chief financial officer, said it’s men who are driving sales in China. She said they are buying accessories, tailored clothing, and heritage products and that Burberry would be putting a “much greater focus” on men’s accessories in Chinese stores going forward.
Wholesale revenue rose 9.2 percent to 95 million, or $152 million, from 87 million, or $139.2 million, with strong performance from men’s tailoring and accessories, shoes and children’s wear.
Total licensing revenue increased by 11 percent. The company said the step-up in royalty income from the Japanese apparel license and good growth from the global product licenses more than offset the planned impact of terminating legacy Japanese nonapparel licenses.
Burberry also said it had received approval for a retail joint venture in Saudi Arabia. Burberry has a 60 percent stake in the venture, which operates five stores. These stores transferred from franchises to directly operated stores last month.
Average retail selling space for Burberry is now planned to increase by around 15 percent for the year ended March 31. It had previously been expected at 12 to 13 percent.