Burberry revenues rise 9 percent in H2, updates outlook

Burberry has reported a revenue of 1.4 billion pounds (2 billion dollars), up 9 percent underlying, with double-digit growth in Americas and EMEIA and strong demand for core heritage trench coats and scarves. Retail sales in the second half grew by 13 percent underlying, up 14 percent at reported FX. Of the 13 percent underlying increase, comparable sales growth was 9 percent.

Commenting on the company’s performance, Christopher Bailey, Chief Creative and Executive Officer, said, “We are pleased to report a robust second half performance, despite an uncertain external environment. Total revenue grew by 9 percent underlying and 13 percent in retail, as customers responded strongly to product innovation, while we continued to invest in digital and retail initiatives, including flagship openings in Los Angeles and Japan.”

By region in the second half, there was double-digit percentage comparable sales growth in both the Americas and EMEIA, with strong performance in the UK, France and Italy from both domestic and travelling luxury customers. Asia Pacific delivered low single-digit percentage comparable sales growth. Within this, China and Korea grew by a mid-single-digit percentage, while Hong Kong, a high margin market, decelerated further during the period, resulting in a mid-single-digit percentage decline in comparable sales in the half. Digital outperformed in all regions.

During the second half, Burberry opened seven mainline stores and closed nine. Openings included a flagship in Rodeo Drive, Los Angeles, a store in the Miami Design District, as well as our second dedicated Beauty store globally, in Seoul, Korea. Directly-operated stores in Japan continued to perform strongly with over 30 percent comparable sales growth. During the half, Burberry opened a flagship in Osaka, our fifth free-standing store, relocated the store in Omotesando, Tokyo and opened three concessions, bringing the total to 13.

Total wholesale revenue in the second half was unchanged year-on-year on an underlying basis, down 1 percent at reported FX. Excluding Beauty, wholesale revenue decreased by 3 percent underlying, in line with guidance. As expected, cautious ordering from wholesale customers selling to the European consumer and in Asian travel retail markets led to a low to mid-single-digit percentage decline in EMEIA and Asia Pacific. Revenue in the Americas was broadly unchanged. Reflecting the success of the My Burberry fragrance, beauty wholesale revenue in the second half was up 8 percent underlying. This represents 25 percent underlying growth for FY 2015.

In the second half, licensing revenue increased 3 percent underlying, down 10 percent at reported FX. This resulted in unchanged revenue for the full year on an underlying basis.

In FY 2016, net new space is expected to contribute low single-digit percentage growth to total retail revenue, with 15-20 mainline store openings and a similar number of closures. This includes further evolution of the store portfolio in China. Burberry expects total wholesale revenue at constant exchange rates to be broadly unchanged in the six months to September 30, 2015. Excluding beauty, the company expects wholesale revenue to be down by a low single-digit percentage, with similar regional trends to those seen in the second half of FY 2015. For beauty, wholesale revenue is expected to grow by 10-15 percent at constant exchange rates in FY 2016, with additional contributions from retail and digital channels.

Exchange rates have had a material impact on reported profit this year. The company’s expected FY 2015 reported retail/wholesale profit will be about 25 million pounds (36.9 million dollars) lower than it would have been at FY 2014 exchange rates. For FY 2016 reported retail/wholesale profit is expected to be about 50 million pounds (73.8 million dollars) higher than at FY 2015 rates, an increase of about 10 million pounds (14.7 million dollars) since January 2015, reflecting the movement in exchange rates.

Total licensing revenue for FY 2016 is planned to be down by about 40 percent at constant exchange rates, due to the expiry of the Japanese licences in June 2015. For FY 2016, Burberry expects double-digit percentage growth from the global product licences and about 25 million pounds (36.9 million dollars) revenue from Japan, as previously guided.