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Growth in fragrance & watch royalties, Burberry

April 20, 2010 (United Kingdom)

Burberry Group plc, the global luxury company, reports on trading for the six months to 31 March 2010.

Angela Ahrendts, Chief Executive Officer, commented:
“With a stronger finish to the year than we had anticipated in both retail and wholesale, we now expect Burberry to deliver adjusted profit before tax in the year just finished slightly above current market consensus.

Looking forward to 2010/11, while the pace and level of the global economic recovery remain unclear, we remain confident that our strategies will continue to build momentum in the business. To drive growth, we will increase investment in new regions, initiatives and digital commerce, while taking further action to enhance the brand.”

Retail
Retail sales, which accounted for over 60% of total revenue in the second half, increased by 15% on an underlying basis (14% reported). New space contributed 5% to this growth.

Comparable store sales in the half increased by 10%. The sales momentum in the third quarter (up 10%) continued into the fourth quarter (up 11%), driven by strong full price sell-through of Spring/Summer 2010 ranges. Both average selling price and gross margin increased compared to last year. Non-apparel was again the strongest performing division across all sub-categories, especially in shoes and soft accessories. In apparel, outerwear again performed well, with awareness driven by the social media site, artofthetrench.com.

Double-digit comparable store sales growth continued in Asia Pacific and Europe. Hong Kong, the UK and the United Arab Emirates were among the best performing markets. There was an improving trend in the Americas, particularly in the fourth quarter, resulting in mid single-digit percentage growth in the second half as a whole.

The net increase of nine mainline stores in the second half included new stores in Paris and Venice and three openings in the Americas (a flagship in Toronto and standalone Burberry London and Burberry Brit stores on Madison Avenue, New York). Average selling space in the second half increased, as planned, by 6%.

Wholesale
Wholesale revenue, which accounted for about 30% of total sales in the second half, declined by 6% on an underlying basis (7% reported). This decline includes the impact of Burberry’s own actions, such as closing certain specialty accounts in Europe, and continued weakness in Spain (which sells a domestic collection unique to that market). Excluding these factors, sales of the global collection grew by a mid single-digit percentage, led by Emerging Markets, the Americas and Travel Retail.

The 6% underlying decline in wholesale revenue is about a £10m improvement on previous guidance of down 10-12%. This outperformance was driven by higher in-season orders than expected due to strong consumer demand and lower cancellation rates due to improved shipping.

A net seven franchise stores were opened during the second half, including the first Burberry stores in Lebanon and Serbia. During the period, China continued to perform very strongly, as did Turkey. Russia and Eastern Europe remained more volatile.

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