LONDON — Revenue at Burberry rose 12.8 percent in the second half thanks to a vigorous fourth quarter fueled by an ever-hungry U.S. market, an expanding retail network, and a booming fragrance business.
On Wednesday, in a statement, Burberry released second-half sales figures while also offering guidance on the current fiscal year, which began April 1. The British company is expecting “high-single-digit” wholesale sales growth, driven primarily by increased sales to existing customers.
“All areas performed well, but in particular the women’s London collection did just great. There was a strong demand for outerwear, trenches, color, prints and florals,” chief executive Rose Marie Bravo told WWD.
She added that women’s wear is “leading the pack” in the fall order book, too, and coats — fur-lined, camel hair, cashmere, duffles and quilted numbers — are driving sales. “Women now think of themselves as having a coat wardrobe,” said Bravo.
Antoine Colonna, an equity research analyst with Merrill Lynch in Paris, said the sales increases beat his expectations across the board. He said Burberry finished riding the crest of its relaunch and has clearly moved into expansion territory.
“We’re seeing strong double-digit growth in the U.S. market, which means that this company is expanding,” he said. “And it’s strong across both product categories and regions.”
Colonna said, going forward, the only problem areas for the company were the negative impact of currency exchanges, and the continued weakness in the Korean market. Bravo agreed. “Korea is a big market for us, and is our softest business globally,” she said, adding that the company was trying to take the currency issue in stride. She said the company raised prices about 3 percent for the fall season.
With regard to the other geographical regions, Bravo said the U.S. and Asia were leaders in the second half ended March 31. Europe made a comeback and the U.K. began showing renewed signs of life about six weeks ago. That market has in particular has been suffering from a drop in U.S. tourist traffic.
In the half ended March 31, revenues grew 12.8 percent to $646.2 million, or 361 million pounds, from $572.8 million, or 320 million pounds, and 15 percent on an underlying basis. Retail sales rose 7.7 percent to $275.7 million, or 154 million pounds, from $256 million, or 143 million pounds, and 12 percent on an underlying basis. Dollar figures are calculated at the current exchange.
Retail sales were driven by accelerated growth in the fourth quarter when sales swelled 14 percent, which came primarily from newly opened stores in Melbourne, Australia; Kuala Lumpur, Malaysia; Hong Kong; Houston; Singapore; Moscow, and an expanded store in Manhasset, N.Y.
Total net selling space increased by approximately 12 percent in the fiscal year and will increase a further 8 percent thanks to the opening of the seven stores listed above and concessions as well as the expansion of existing stores.
Over the coming year, stores will open in Rome; Charlotte, N.C.; Boca Raton. Fla.; King of Prussia, Pa., and Scottsdale, Ariz.
Meanwhile, wholesale revenues jumped 17.9 percent to $306.1 million, or 171 million pounds, from $259.6 million, or 145 million pounds, and 16 percent on an underlying basis. Results were driven by strong sales growth for the spring 2004 collection, the company said.
The U.S. was a major driver both of wholesale and retail sales in the half. Continental Europe began to show signs of a comeback during the period, and Hong Kong and Southeast Asia performed strongly. Korea continued to be adversely affected by the volatile macroenvironment, the company said.
Licensing revenues increased by 16.1 percent to $64.4 million, or 36 million pounds, from $55.5 million, or 31 million pounds, and 21 percent on an underlying basis. That increase was driven by big gains in global products such as fragrances, and in particular, the launch of Burberry Brit.
In the Japanese market, a rise in licensing revenues reflected increases in certain royalty rates and a reduction in management fees. In Japan, however, sales volumes were in line with the previous year.
Bravo said Burberry’s challenge in the current fiscal year was to drive the business. “All of the strategies are now in place, so it’s all about execution, and a consistent performance. As the numbers get bigger, we’re less able to make mistakes, and the danger is that we take our eyes off the ball. We just have to keep plugging.”
The company will report profit figures for the 2003-04 fiscal year on May 24.