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Monthly flow & replenishment drive growth, Burberry

19 Apr '11

5 min read

During the second half, Burberry opened a net seven mainline stores including Beijing, Shenzhen, Delhi, São Paulo and Puebla, Mexico, as well as further Brit trial stores in New York and Milan. Average retail selling space for the second half increased by 26%, of which 16% came from China (both acquired stores and new openings) and 10% from other regions.

Wholesale

Excluding China, wholesale revenue in the second half increased by 29% at constant exchange rates, ahead of guidance. Robust demand and improved supply chain and systems capabilities led to increased in-season orders and higher fulfilment rates in all regions. Americas and Asia Pacific grew strongly, as did menswear, where Spring/Summer 2011 was the first collection designed entirely in house, following the termination of regional licences. Initial sales of the global collection in Spain also contributed 4% of the 29% growth.

Including China, wholesale revenue in the second half increased by 14% underlying (up 13% at reported FX).

During the second half, a net eight franchise stores were opened, including new markets such as Tel Aviv, Cairo and Armenia.

Licensing

Total licensing revenue in the second half declined by 5% on an underlying basis (down 6% at reported FX), in line with guidance. As expected, growth from global product licences was offset by the planned termination of both the Japanese leather goods licence in 2010 and the final regional menswear licences.

Outlook

Retail: In the year to 31 March 2012, Burberry plans an increase of 12-13% in average retail selling space. This includes a net 20-25 additional mainline stores with a bias towards China, Latin America and the Middle East. In addition, the 50 stores acquired in China will add about 12% to average selling space in the first half of the year.

Wholesale: In the six months to 30 September 2011, Burberry projects wholesale revenue excluding China to increase by a mid teens percentage at constant exchange rates. Good progress is expected from the Americas, Travel Retail and Emerging Markets and sales of the global collection in Spain are expected to continue to contribute a low single-digit percentage to this growth.

Including China, wholesale revenue growth in the first half is projected to increase by a mid single-digit percentage at constant exchange rates (2010: £226m).

Licensing: In the year to 31 March 2012, Burberry expects licensing revenue at constant exchange rates to increase by a mid single-digit percentage. This assumes all Japanese apparel and non-apparel royalty income is received at contractual minimum levels as originally planned.

On this basis, underlying licensing revenue from Japan is expected to be broadly flat year-on-year. A step-up in royalty income from the apparel licence, which was negotiated in October 2009, will be offset by the planned termination of additional non-apparel licences in Japan. The global fragrance, eyewear and timepieces product licences are expected to deliver double-digit growth.

In the year to 31 March 2012, licensing revenue at reported FX is expected to increase by a high single-digit percentage, reflecting a more favourable yen hedge rate year-on-year.

Burberry Group plc

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