LONDON — Burberry Group plc is having a better-than-expected year.
This story first appeared in the January 20, 2010 issue of WWD. Subscribe Today.
On Tuesday, the company handily beat analysts’ projections, reporting a 15.5 percent rise in third-quarter revenue to 380 million pounds, or $619.4 million, from 329 million pounds, or $536.3 million, thanks mainly to full-price sales of outerwear and nonapparel and to double-digit growth in Europe and Asia-Pacific.
All figures have been converted at average exchange rates for the three months to Dec. 31.
Chief executive officer Angela Ahrendts said as a result of the “strong” performance in the crucial pre-Christmas quarter, Burberry expects year-end adjusted profit before tax to be “towards the top end of market expectations.”
Analysts expect profits to land between 175 million pounds, or $285 million, to 200 million pounds, or $326 million, when the fiscal year ends on March 31.
The company also said it is anticipating better-than-expected wholesale results for the second half. Burberry is projecting wholesale sales to be down 10 to 12 percent, rather than 15 percent.
In the third quarter, wholesale sales grew 10.5 percent. The company said the uptick was due to earlier shipments compared with last year, part of a strategy to deliver new ranges more frequently to wholesale customers. The company also pointed to improved shipping and higher reorders than previously anticipated.
Stacey Cartwright, chief financial officer, said in an interview the third-quarter results are a “coming together and ratification” of marketing strategies — including the London Fashion Week show in September and the Art of the Trench Web site; the brand’s recently upgraded sales and service program, and the overall product.
She said among the sales drivers in the period were small leather goods; cashmere scarves and snoods, and a broader range of footwear. The big challenges going forward, she added, would be ensuring that sales growth in the final quarter. “There is far less clearance inventory in our stores — London is almost all sold out — and it’s only mid-January,” she said.
By region, Europe — led by the U.K. — was the strongest performer in the period, with sales up 27.2 percent, followed by Asia-Pacific — led by Hong Kong — with growth of 20.3 percent. The Americas region, which now includes Central and South America in addition to the U.S., grew 3.6 percent.
Luca Solca, senior analyst at Bernstein in London, cited Burberry’s strong numbers as “further confirmation that recovery is gaining traction in the luxury goods sector.” He said looking ahead, “luxury goods demand seems to enjoy a better outlook than general retail,” due to sustained growth in emerging markets and a rebound in more mature ones.
Antoine Belge of HSBC in Paris said Tuesday he had expected Burberry to report sales of 330 million pounds, or $537.9 million.
“Following strong figures from Tiffany and Richemont recently, Burberry beating expectations should not come as a genuine surprise, though the amplitude of the beat was quite substantial,” he said