Burberry reports 2 percent rise in H1 retail sales

For the first six months to September 30, 2016, Burberry’s total revenue of 1,159 million pounds (1,417 million dollars) were down 4 percent underlying but up 5 percent at reported FX. Retail sales in the half increased by 2 percent underlying and 11 percent at reported FX). The company said that retail growth was offset by a decline in wholesale and licensing, in part reflecting strategic brand elevation.

Commenting on the first half trading, Christopher Bailey, Chief Creative and Chief Executive Officer, said, “In a challenging external environment, we continue to focus on product innovation, retail productivity and digital leadership, against a backdrop of sustained action and investment to deliver long-term outperformance of our brand and business. We remain on track to deliver our financial goals.”

Financial highlights of the first half

Comparable retail sales were unchanged year-on-year, with an improvement in the second quarter of 2 percent. By region, Asia Pacific saw a low single-digit percentage comparable sales decline in the half, broadly similar across both quarters. Mainland China improved with mid-single-digit percentage comparable sales growth in the second quarter, despite the impact of the planned elevation of the store portfolio in Beijing, Burberry’s largest market in the country. Hong Kong continued to experience negative footfall throughout the half, with comparable sales down a double-digit percentage. Excluding Hong Kong and Macau, comparable sales in the region were positive in the half.

EMEIA delivered low single-digit percentage comparable sales growth in the half. Improved performance from the travelling luxury customer in the second quarter was most significant in the UK, with comparable sales up over 30 percent. Major markets in Continental Europe remained weak, where growth from domestic customers was more than offset by declines in tourist spend. The Americas saw comparable sales for the first half down a low single-digit percentage. Digital continued to outperform in the half, with growth in all three regions.

By product, Burberry said, fashion outperformed replenishment as customers responded positively to innovation and newness. Growth in bags was led by the runway rucksack and new Buckle bag collection. Emerging growth categories of dresses and ponchos outperformed.

Wholesale revenue in the half decreased by 14 percent underlying and 6 percent at reported FX), which the company said was broadly consistent with guidance. Excluding beauty, underlying wholesale revenue in EMEIA and Asia Pacific was largely unchanged year-on-year. The Americas saw a significant decline. In Beauty, underlying wholesale revenue declined by 20 percent. Primarily reflecting the planned expiry of the Japanese Burberry licenses, licensing revenue declined by 54 percent underlying and 51 percent at reported FX.

Retail expansion expected to drive retail sales

In FY 2017, the company said, net new space is still expected to contribute low single-digit percentage growth to total retail revenue. Around 15 mainline store openings are planned, with a similar number of closures. Burberry expects total wholesale revenue at constant exchange rates in the six months to 31 March 2017 to be down by a mid-teens percentage on the same period last year.

It added that using September 30 exchange rates, FY 2017 reported adjusted retail/wholesale profit would benefit by about 105million pounds (128 million dollars) compared to FY 2016 rates and given the significant movement in exchange rates since September 30, the benefit using October 12 rates would be at least 20 million pounds (24 million dollars) higher than the 105 million pounds. Total licensing revenue for FY 2017 is still planned to be down by about 20 million pounds (24 million dollars) at constant exchange rates.

Picture:Burberry