Excluding beauty segment, wholesale sales grew 2 percent, with gains in the Americas and Asia partially offset by continued softness in Europe. Beauty, in its first year of operation, contributed wholesale revenue of 144 million pounds (241.1 million dollars), while licensing revenue, excluding beauty, increased 2 percent underlying, reflecting growth in global categories against a slight decline in legacy licences.
John Peace, Chairman of Burberry said elaborating on the results, “Within that context, we can report a strong year for Burberry in 2013/14. While representing this year’s efforts, the results also reflect the disciplined pursuit and execution of a uniform strategy over the past several years – a strategy designed to produce near-term results and reinforce the foundation for future success.”
In addition to the strategic and financial performance, 2013/14 also marked a significant leadership transition at Burberry. In October, Angela Ahrendts informed the board that she had decided to step down as Chief Executive Officer and the board unanimously agreed that Christopher Bailey would be her successor in the newly-created position of Chief Creative and Chief Executive Officer, a role he assumed on 1 May 2014.
The board is also evolving, as it builds further relevant skills and competencies for the future. Good progress has been made on the board’s succession plan during the year with the appointment of Matthew Key and Jeremy Darroch as non-executive directors and the announcement that Carolyn McCall will be joining the board as a non-executive director on 1 September 2014.
Burberry owned distribution network consisting of 497 directly operated stores and concessions operating in 32 countries and Burberry.com digital platform active in 11 languages. Its third-party distribution network includes 70 franchise stores in an additional 28 countries and approximately 1,400 wholesale department and specialty store doors in over 80 countries.
Burberry has a diversified product offering across apparel, accessories and beauty and by gender. For 2013/14, accessories represented 36 percent of retail/wholesale revenue, women’s 30 percent, men’s 23 percent, children’s 4 percent and beauty 7 percent.
In FY 2015, net new space is expected to contribute low to mid-single-digit percentage growth to total retail revenue. Burberry plans to open about 20-25 mainline stores and close between 15-20, with openings biased to flagship markets and travel retail, while further evolving the store portfolio in China and the Middle East in particular.
Excluding beauty, Burberry expects wholesale revenue at constant exchange rates to be broadly unchanged in the six months to 30 September 2014. Excluding rephased deliveries and ongoing strategic initiatives, such as conversion from wholesale to direct control and account rationalisation, revenue growth of around 5 percent is planned. For beauty, the fifth product division, wholesale revenue is expected to grow by about 25 percent at constant exchange rates in FY 2015.
If exchange rates remain at current levels, the full impact on reported retail/wholesale profit in FY 2015 will be material. As an indication, rebasing FY 2014 retail/wholesale profit for current exchange rates would reduce reported profit by about 40million pounds (66.9 million dollars) and adjusted operating margin from 17.5 percent to around 16.3 percent. Burberry increased retail/wholesale operating margin by about 200 basis points over the last three years.
For FY 2015, Burberry expects broadly unchanged revenue at constant exchange rates in both Japan and global product licences, the latter reflecting the rationalisation and elevation of watch distribution. At current exchange rates, reported licensing revenue in FY 2015 will be reduced by about 10million pounds (16.7 million dollars) given the movement in the sterling/yen rate.