Burberry sees strong performance in first half

14 Oct '08

5 min read

Burberry Group plc, the global luxury company reports on trading for the six months to 30 September 2008.

First half highlights (on an underlying basis)
• Total revenue increased by 13%

• Retail revenue up 14%, with comparable store sales growth of 3.4%
- Innovation in iconic outerwear and accessories driving sales
- Growth in all regions except Spain

• Wholesale revenue increased by 15%
- Boosted by strong product designs and more on-time deliveries
- North America, Europe and Emerging Markets all performed well

• Licensing revenue down 3%

• Looking forward, Burberry is now planning
- Average retail selling space in second half up 12%
- Wholesale revenue in second half broadly flat
- Progress in North America and Emerging Markets offset by continuing weakness in Spain
- Licensing revenue in full year slightly down

Commenting on this performance, Angela Ahrendts, Chief Executive Officer, said:
“I am pleased with Burberry's performance in the first half of the year, against the background of an increasingly challenging external environment. The strength of our diversified business model was again demonstrated as we delivered double-digit growth for the fifth consecutive six-month period.

While we expect trading conditions in the all-important third quarter to remain volatile and uncertain, we continue to focus on our proven product, regional and channel strategies to drive long-term growth.”

Total revenue in the first half increased by 13% on an underlying basis (20% reported). The strength of Burberry's diversified business model was again demonstrated in the period, with double-digit underlying growth in both retail and wholesale; in all product categories; and in Americas, Europe, Asia and Rest of World. Improvements in the supply chain enabled more on-time deliveries of Autumn/Winter merchandise, which benefited both Burberry's retail stores and its wholesale customers.

Spain remains a difficult market for Burberry due to low consumer confidence in the poor economic environment. In the first half, total sales in Spain were down 20%. No improvement is planned in Spain wholesale for the second half of the year. Burberry continues to implement a series of initiatives in this market, as discussed at the time of the preliminary results in May 2008.

Operating profit for the first half of the year is expected to be in line with market estimates. A lower percentage of merchandise was sold at full price, impacting gross margin, which was offset by tight control of discretionary expenses. Inventory at 30 September 2008 is expected to be about £60m higher than at 31 March 2008 (£269m), including the currency translation impact.

Retail
Retail sales, which accounted for 45% of total revenue in the first half, increased by 14% on an underlying basis (21% reported). Innovation in iconic outerwear and accessories helped drive sales. There was 10.7% growth from new space and a 3.4% increase in comparable store sales (Q1 +4.5%; Q2 +2.6%). This was achieved on top of a strong performance last year (comparable store sales up 9% in Q1 2007 and 13% in Q2 2007).

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