LONDON — Rising sales and the absence of charges from its initial public offering helped Burberry Group plc to more than double its first-half profits.
This story first appeared in the November 19, 2003 issue of WWD. Subscribe Today.
In the six months ended Sept. 30, net income skyrocketed 161.9 percent to $70.8 million from $27 million in the year-ago period. Dollar figures have been converted from the pound at current exchange, as Burberry reported profits of 41.9 million pounds versus 16 million pounds in the 2002 period. Burberry reports earnings on a semiannual rather than quarterly basis.
Stripping away year-ago charges related to its July 2002 IPO, profits would have rose 25.4 percent from $56.4 million, or 33.4 million pounds.
Separately, Burberry said it has named Stacey Cartwright as chief financial officer, succeeding Mike Metcalf when he departs in March. Cartwright was formerly chief financial officer of Egg plc, a financial services provider listed on the London Stock Exchange.
Burberry hasn’t yet named a successor to Metcalf in his other role as chief operating officer of the firm.
In a telephone interview, Metcalf said Burberry’s strong numbers were partly because of the broad appeal of the brand. “We speak across apparel and accessories categories, and to a wide variety of regions, and I think that’s given the brand an edge. This is a broadly based business,” he said. “In the U.S., sales were up 30 percent on a constant currency basis and in Asia — excepting Japan — they were up 20 percent in constant currency. I think that speaks volumes about who we are.”
Metcalf added that Burberry, too, has not been as exposed as other brands to travel-related downturns in consumption: “For example, we never relied as much as other companies on Japanese tourism. We have a healthy mainland Chinese customer base.”
Despite the strong results, shares of Burberry dropped 3.8 percent to $6.49 on the London Stock Exchange which analysts, speaking on condition of anonymity, attributed to profit-taking by a major investor. Burberry shares have risen about 26 percent since the firm’s sales update last month and are about 90 percent above their 52-week low.
As reported in October, a vigorous U.S. market and three store openings boosted Burberry revenues 17.4 percent in the first half to $542.9 million, or 321.3 million pounds, from $462.6 million, or 273.7 million pounds.
The company noted, “Throughout the first half, the U.S. was consistently the best-performing market, driven by strong gains in directly-operated stores and among wholesale partners.”
The company’s revenue growth was powered by a 25.2 percent rise in retail sales to $181.2 million, or 107.2 million pounds, and a 14 percent climb in wholesale sales to $310 million, or 183.4 million pounds.
By the fiscal year’s end next March, total retail selling space will have grown more than 12 percent. “Management anticipates that space expansion will be the dominant driver of retail revenue growth during the second half,” the company said in a statement.
Wholesale results benefited from a pickup in sales in Spain, where a repositioning of the brand began to pay dividends, the statement said. Wholesale sales growth was also driven by double-digit gains for the fall 2003 season.
Licensing revenue grew 12.9 percent to $51.9 million, or 30.7 million pounds. Licensing revenues from the Japanese market benefited from increases in certain royalty rates and single-digit volume gains.
During the period, gross profit as a percentage of turnover dropped to 55.6 percent of turnover from 55.8 in the prior period. The company said gains from pricing, sourcing, and channel mix were offset by costs associated with greater seasonal clearance activity in the first half.
However, operating expenses as a percentage of turnover were reduced to 34.7 percent of sales from 35.6 percent in the previous period thanks in part to more focused cost controls.
The company will provide a third quarter trading update on Jan. 13 and a second half trading update on April 14.