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Growth in fragrance & watch royalties, Burberry
20 Apr '10
5 min read
Licensing
Total licensing revenue in the second half declined by 6% on an underlying basis, in line with guidance. Revenue was up 23% reported, reflecting primarily the strength of the yen, which is largely hedged 12 months forward. A new fragrance, Burberry Sport, was launched in the fourth quarter, supported by digital marketing campaigns.
Outlook
Retail: In the year to March 2011, Burberry plans an increase of around 10% in average retail selling space, weighted towards the second half. At this stage, this assumes no further change to the store portfolio in Spain following the restructuring announced in February 2010. Between 20-30 mainline store openings are planned, biased towards the Americas and Asia Pacific.
Wholesale: In the six months to 30 September 2010, Burberry projects wholesale revenue at constant exchange rates to increase by a high teens percentage excluding Spain. Significant growth is expected in all regions except Europe, where continued rationalisation of small specialty accounts is planned.
Including Spain, where a further material contraction in the sales of the domestic collection is expected, underlying wholesale revenue is projected to increase by around 10%.
Licensing: In the year to March 2011, Burberry expects underlying licensing revenue to decline by between 5-10%.
In line with the amended licence agreement, royalty income from Japanese apparel is expected to be broadly flat year-on-year. Growth from the global product licences will be led by fragrances and watches. However, these will be more than offset by further planned terminations of both the Japanese leather goods licence and the final menswear licences. With the establishment of the Japanese non-apparel joint venture in November 2008, this market now has the global collection for the first time in ten test stores and concessions.
Restructuring of Spanish operations: In February 2010, Burberry announced the planned restructuring of its Spanish operations consistent with its strategy of aligning Burberry in Spain with its global business model. The implementation of this restructuring is on track. In addition to the one-off charge of Euro50m-70m already disclosed, Burberry in Spain is expected to incur higher trading losses in the transitional year 2010/11 than in 2009/10. More details will be given with Burberry's preliminary results on 26 May 2010.
Total licensing revenue in the second half declined by 6% on an underlying basis, in line with guidance. Revenue was up 23% reported, reflecting primarily the strength of the yen, which is largely hedged 12 months forward. A new fragrance, Burberry Sport, was launched in the fourth quarter, supported by digital marketing campaigns.
Outlook
Retail: In the year to March 2011, Burberry plans an increase of around 10% in average retail selling space, weighted towards the second half. At this stage, this assumes no further change to the store portfolio in Spain following the restructuring announced in February 2010. Between 20-30 mainline store openings are planned, biased towards the Americas and Asia Pacific.
Wholesale: In the six months to 30 September 2010, Burberry projects wholesale revenue at constant exchange rates to increase by a high teens percentage excluding Spain. Significant growth is expected in all regions except Europe, where continued rationalisation of small specialty accounts is planned.
Including Spain, where a further material contraction in the sales of the domestic collection is expected, underlying wholesale revenue is projected to increase by around 10%.
Licensing: In the year to March 2011, Burberry expects underlying licensing revenue to decline by between 5-10%.
In line with the amended licence agreement, royalty income from Japanese apparel is expected to be broadly flat year-on-year. Growth from the global product licences will be led by fragrances and watches. However, these will be more than offset by further planned terminations of both the Japanese leather goods licence and the final menswear licences. With the establishment of the Japanese non-apparel joint venture in November 2008, this market now has the global collection for the first time in ten test stores and concessions.
Restructuring of Spanish operations: In February 2010, Burberry announced the planned restructuring of its Spanish operations consistent with its strategy of aligning Burberry in Spain with its global business model. The implementation of this restructuring is on track. In addition to the one-off charge of Euro50m-70m already disclosed, Burberry in Spain is expected to incur higher trading losses in the transitional year 2010/11 than in 2009/10. More details will be given with Burberry's preliminary results on 26 May 2010.
Burberry Group plc
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