LONDON — New stores and earlier spring deliveries drove Burberry Group plc’s revenues up 12 percent in the third quarter ending Dec. 31, 2003. The company said in a brief trading statement Tuesday that revenue in the quarter grew 15 percent on an underlying basis, or at constant exchange rates.
This story first appeared in the January 14, 2004 issue of WWD. Subscribe Today.
Burberry did not provide detailed figures for profits or sales in the statement. The company expects to issue its second-half trading update, which will include specific figures, on April 14.
Chief executive Rose Marie Bravo said Tuesday the third-quarter numbers were all the more satisfying given the “exceptional” results of the prior year. She added that business showed no signs of slowing in the last quarter.
“We’re encouraged by the strong initial consumer response to our spring-summer product at retail. Customers around the world want their spring collections earlier and earlier, and we’ve been able to meet the demand,” said Bravo in a telephone interview.
She added that with a healthy wholesale order book for the season, Burberry enters the remaining quarter of the year with “continued momentum.”
While the increasingly feeble dollar hasn’t been a boon, Burberry has managed to protect its margins. “The currency environment has not been favorable to us,” said Bravo. “But the dollar weakness has been partially offset by hedging and by a strong balance of sales and manufacturing across various geographical regions.”
Retail sales increased by 7 percent, with 11 percent underlying growth, and accounted for about 60 percent of total revenue in the quarter. New stores from Milan to Malaysia contributed to the growth.
By region, Burberry called its performance in the U.K. “sluggish,” while continental Europe continued to gain momentum.
“The U.K. went soft last February, and that was before the war, before SARS. In addition, we had the London congestion charge — we just went from one drawback to another,” said Bravo. “Sales in the U.K. have been depressed all year — not just in the quarter.”
Bravo added that the U.S. and Asia were a much better story. “The U.S. continues to do well, while Asia saw a turnaround at the end of July,” she said.
Burberry said Hong Kong has “fully recovered” from the shocks it suffered last year as a result of the SARS epidemic. The company described the South Korean business as “resilient” in a volatile environment.
Of the four stores that opened in the third quarter, all were in the eastern hemisphere: Melbourne, Kuala Lumpur, Hong Kong and Singapore. By the end of the current financial year, Burberry expects to have expanded overall selling space by 12 percent.
As reported, last week Burberry named Lynne Ronon, a Saks Fifth Avenue and Lane Crawford alumnae, as senior vice president of the North Asia region, directing the company’s growth in China, Hong Kong, Taiwan, the Philippines, Guam and Saipan.
Melanie Flouquet, an equities analyst for J.P. Morgan Chase & Co. in London, said while Burberry’s numbers were good overall, she was “slightly disappointed” with retail sales. “Like-for-like sales were marginal — about 1 percent up — because of the U.K. market, which represents about 20 percent of Burberry’s sales,” said Flouquet.
“The U.K. was a sore point this quarter, but then again, the local luxury apparel market has been weak overall. The company stated that warm weather conditions, the congestion charge and the George Bush visit to London have had a negative impact. We think that rising interest rates and a small degree of cannibalization by Burberry’s Knightsbridge store, which opened in November of 2002, have also played their part in this weak performance in the U.K.,” she added.
Wholesale sales rose by 23 percent, boosted by the trend toward earlier deliveries for spring-summer collections. The company is expecting high-single-digit wholesale sales growth for the spring-summer 2004 season. The majority of spring merchandise is shipped in the fourth quarter of each year.
Licensing revenues increased by 10 percent, and by 18 percent on an underlying basis. They benefited in part, the company said, from strong sales gains by global product licensees, particularly fragrances, where Burberry Brit continued to benefit from its launch.