Underlying licensing revenue to decline by 10-15% at Burberry
Burberry Group plc, the global luxury company, reports on trading for the three months to 30 June 2009. Angela Ahrendts, Chief Executive Officer, commented:
“Burberry has made a solid start to the year in what remains a challenging environment. We continue to execute on our strategies by product, region and channel, while driving operational and cost efficiencies. Our brand momentum, strong product designs and continuing back-of-house improvements mean that we are well-placed to deliver sustainable long-term growth.”
First quarter highlights
• Total revenue down 4% underlying, up 8% reported
• Retail revenue up 12% underlying, with comparable store sales flat year-on-year
o Europe and Asia up double-digit, driven by UK and Korea
o United States and Spain remain difficult
• Wholesale revenue down 28% underlying in this small quarter
o Consistent with guidance of down about 25% for H1
- Around 15% down as wholesale customers adjust inventory levels
- Around 10% down from Burberry's own actions and closures
o Strong brand momentum supporting department store share gains
• Licensing revenue down 3% underlying
o Guidance unchanged for full year
- Underlying licensing revenue to decline by 10-15%
- More than offset by currency benefits at reported level
• Further strategic and operational progress
o Non-apparel and childrenswear performed strongly
o Three franchise stores opened in Emerging Markets
o SAP went live in US
o New Americas HQ and showrooms opened at 444 Madison Avenue
o Benefits from cost efficiency programme on track
Retail sales, which accounted for about two-thirds of total revenue in the period, grew by 12% on an underlying basis (up 28% reported). New space generated 8% of this growth, with Burberry Middle East contributing 4%.
Comparable store sales in the quarter were flat year-on-year, reflecting positive customer response to the Spring/Summer ranges, particularly to new accessory programmes and recent strategic initiatives, including mens tailoring, denim, sport and childrenswear.
Europe and Asia both delivered double-digit percentage growth, with exceptional performances again in the UK and Korea (both helped by favourable currency movements). The United States and Spain remain more difficult markets, with comparable store sales in both markets again down double-digit in the quarter.
For the year as a whole, Burberry plans to open a net 10-15 mainline stores, with an increase in average selling space of 10-12%.
In what is the smallest quarter of the year for wholesale, revenue in the period declined by 28% on an underlying basis (down 21% reported).
Burberry is projecting wholesale revenue to be down by about 25% at constant exchange rates for the six months to 30 September 2009. This includes the impact of the closure of Thomas Burberry; the continued planned rationalisation of many small speciality accounts in Europe; and the conversion of Burberry Middle East from wholesale to retail.