LONDON – The weak pound proved a boon once again for Burberry Group, which reported a 19 percent uptick in retail revenue to 1.27 billion pounds, or $1.57 billion, in the six months to March 31. Stripping out the currency boost, retail revenue rose 3 percent, as did comparable sales in the half.
Burberry said strength in Mainland China drove growth in the Asia-Pacific region during the six months, while the U.K. showed “exceptional performance” thanks to lower ticket prices from the weak pound. The U.K. helped the entire European region grow in the double digits.
The Americas, where Burberry has been taking a tough stand against department store promotions and discounting, continued to decline.
Total revenue, which includes wholesale and licensing, was up 14 percent in reported terms to 1.61 billion pounds, or $2 billion, but fell 1 percent on an underlying basis. The company pinned the decline on the implementation of “strategic priorities and actions to improve brand positioning,” notably in the U.S. and in beauty.
Shares were down 5.6 percent in midday trading following the announcement at 16.05 pounds, or $20.30.
Wholesale revenue fell 1 percent at reported rates to 327 million pounds, or $406 million, and was down 13 percent underlying, in line with guidance. More than half the decline come from downsized distribution in key markets and distributor destocking in its beauty business, Burberry said.
Dollar figures have been converted at average exchange for the six months.
As reported, Burberry has given up on running its beauty business in-house and has inked a license with Coty Inc., which will start to take effect later this year, subject to regulatory approvals.
“In an uncertain environment, we continue to take action to strengthen the brand and reposition Burberry for growth,” said Christopher Bailey, Burberry’s chief creative and chief executive officer.
“The outperformance of fashion and the strong customer response to new products underline our renewed creative momentum. While we have more to do, as we build on our progress so far, we remain confident about Burberry’s prospects in the longer term,” he continued.
The company said it expected the impact of year-over-year exchange rate movements on reported adjusted retail-wholesale profit for fiscal 2016-’17 would be about 130 million pounds, or $166.7 million.
Although Burberry didn’t offer guidance for the 2017-’18 fiscal year, the company confirmed there would be no contribution from new store space as it focuses on “productivity” from its current store footprint. Burberry, like other luxury brands, is living with the reality of past rapid retail expansion, and wants its stores to work harder.