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Burberry says material improvement in gross margin
13 Oct '10
5 min read
Wholesale
Excluding China, which transferred from wholesale to retail from 1 September 2010, wholesale revenue grew by 21% at constant exchange rates, slightly ahead of guidance. This largely reflects restocking by wholesale customers, following reduced demand in the same period last year.
Asia Pacific, the Americas and Emerging Markets all showed above average growth. Sales in Europe, still the group's largest wholesale region, were slightly ahead of last year, despite the planned continued rationalisation of small specialty accounts. Wholesale revenue including China increased by 17% at constant exchange rates, up 20% reported (2009: £188m). This growth included only five months of revenue from China in H1 2010 until acquisition, compared to six months in H1 2009.
Licensing
Total licensing revenue in the first half declined by 3% on an underlying basis (up 9% reported). Good growth from the global product licences was offset by the planned non-renewal of the final menswear licences and the Japanese leather goods licence. There was a strong initial response to Burberry Beauty which was launched in July on a limited distribution basis.
Outlook
Retail: For the second half, average selling space is expected to increase by about 25%. About 15% of this is from China (both acquired stores and new openings), with the balance of about 10% from other regions as previously guided. Burberry expects to open around ten mainline stores in the second half, of which about half are planned for China.
Wholesale: For the second half, against a period last year where demand had recovered, Burberry expects wholesale revenue excluding China to increase by around 10% at constant currency, led by Emerging Markets and Travel Retail.
Rationalisation of European small specialty accounts continues.
For the second half, wholesale revenue including China is expected to be down by a low single-digit percentage at constant currency (2009: £189m). This includes no revenue from China in H2 2010/11, compared to six months in H2 2009/10.
Licensing: For the full year, Burberry now expects underlying licensing revenue to decline by a mid single-digit percentage (previously down by between 5-10%), due to a stronger than expected performance from the global licences, especially fragrance and watches. This will partly offset a broadly flat performance from the Japanese apparel licence and the non-renewal of the final menswear licences and the Japanese leather goods licence.
The yen hedge rate for the full year 2010/11 will give only a marginal benefit to reported numbers compared to 2009/10, with the exchange b benefit already reported in the first half expected to reverse partly in the second half.
Spain: The restructuring in Spain remains on track.
Click here for more details
Excluding China, which transferred from wholesale to retail from 1 September 2010, wholesale revenue grew by 21% at constant exchange rates, slightly ahead of guidance. This largely reflects restocking by wholesale customers, following reduced demand in the same period last year.
Asia Pacific, the Americas and Emerging Markets all showed above average growth. Sales in Europe, still the group's largest wholesale region, were slightly ahead of last year, despite the planned continued rationalisation of small specialty accounts. Wholesale revenue including China increased by 17% at constant exchange rates, up 20% reported (2009: £188m). This growth included only five months of revenue from China in H1 2010 until acquisition, compared to six months in H1 2009.
Licensing
Total licensing revenue in the first half declined by 3% on an underlying basis (up 9% reported). Good growth from the global product licences was offset by the planned non-renewal of the final menswear licences and the Japanese leather goods licence. There was a strong initial response to Burberry Beauty which was launched in July on a limited distribution basis.
Outlook
Retail: For the second half, average selling space is expected to increase by about 25%. About 15% of this is from China (both acquired stores and new openings), with the balance of about 10% from other regions as previously guided. Burberry expects to open around ten mainline stores in the second half, of which about half are planned for China.
Wholesale: For the second half, against a period last year where demand had recovered, Burberry expects wholesale revenue excluding China to increase by around 10% at constant currency, led by Emerging Markets and Travel Retail.
Rationalisation of European small specialty accounts continues.
For the second half, wholesale revenue including China is expected to be down by a low single-digit percentage at constant currency (2009: £189m). This includes no revenue from China in H2 2010/11, compared to six months in H2 2009/10.
Licensing: For the full year, Burberry now expects underlying licensing revenue to decline by a mid single-digit percentage (previously down by between 5-10%), due to a stronger than expected performance from the global licences, especially fragrance and watches. This will partly offset a broadly flat performance from the Japanese apparel licence and the non-renewal of the final menswear licences and the Japanese leather goods licence.
The yen hedge rate for the full year 2010/11 will give only a marginal benefit to reported numbers compared to 2009/10, with the exchange b benefit already reported in the first half expected to reverse partly in the second half.
Spain: The restructuring in Spain remains on track.
Click here for more details
Burberry Group plc
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