REPORT_ At 928 million pounds (1,552 million dollars), Burberry’s retail sales, which accounted for over 70 percent of group revenue in the second half, increased by 13 percent at constant FX, with comparable sales growth of 12 percent.
In the second half, all five product divisions and both fashion and replenishment delivered double-digit percentage growth in mainline retail. Building on core outerwear and large leather goods, which together accounted for nearly half of the growth, mens accessories, men’s tailoring, women’s spring/summer prorsum and beauty performed strongly. Reflecting changing consumer behaviour, footfall offline remained soft, while online traffic grew. Conversion increased both offline and online, further driving retail productivity.
Commenting on the development, Angela Ahrendts, Chief Executive Officer, said, “We are pleased with our second half performance, with total revenue up 19 percent and retail sales up 13 percent, underpinned by the planned increase in investment in offline and online retail, innovative customer service and marketing. With the management transition well underway, Burberry begins a new year with beauty firmly established as the fifth product division and investment in flagship markets, such as Shanghai, further increasing the brand’s appeal to the core luxury customer at home and when travelling.”
By region, Asia Pacific again saw double-digit percentage comparable sales growth led by Greater China and continuing momentum in Korea. Americas and EMEIA both delivered mid to high single-digit percentage comparable sales growth. During the second half, Burberry opened eleven mainline stores and closed nine. Openings included the Kerry Centre, Shanghai, Burberry’s largest store in Asia Pacific, the first Burberry Beauty Box in Covent Garden, London and one store in each of Mexico and India. Nine Holt Renfrew locations in Canada were converted from wholesale to retail concessions. In addition, one store and two concessions previously operated by a franchisee were acquired in Thailand.
Excluding Beauty, wholesale revenue at 240 million pounds (401.4 million dollars) increased by 11 percent at constant FX (up 9 percent at reported FX). A net four franchise stores were opened in the second half, including a first store with a new partner in Barbados and one additional store in each of Colombia, Indonesia and Vietnam.
Licensing revenues grew 2 percent. Revenue was down 9 percent at reported FX, primarily reflecting the adverse movement in the sterling/yen exchange rate. Royalty income from Japan was largely unchanged at constant FX, with global product licences (watches and eyewear) delivering mid to high single-digit percentage growth, both consistent with full year guidance.
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 September 30, 2014. For Beauty, the fifth product division, wholesale revenue is expected to grow by about 25percent at constant exchange rates in FY 2015.