12th Nov 2014 07:43
LONDON (Alliance News) - British luxury fashion retailer Burberry Group PLC Wednesday reported a drop in its pretax profit in the first half, after taking a big currency hit from the strength of sterling, and it again warned of pressure to its margins for the full year.
On a reported basis, Burberry posted a pretax profit of GBP142 million for the six months to September 30, down from GBP159 million the prior year, after taking a GBP31 million hit from the strong pound. On an adjusted basis, its pretax profit was up 6% on an underlying basis, and down 12% at reported rates.
"Looking ahead, in a more difficult external environment, we continue to focus on the things that we can control. Through authentic products, great customer experiences and a culture of continuous improvement and innovation, we remain confident of Burberry's sustained outperformance," said Chief Executive Christopher Bailey in a statement.
Burberry upped its interim dividend by 10% to 9.7 pence per share, which it said reflects its intention to "move progressively to a 50% dividend payout ratio".
Sales continued to be driven by its iconic trench coats and large leather goods goods, with demand led by Chinese consumers shopping both in China and when travelling abroad.
Revenue rose 14% on an underlying basis in the six months to September 30, to GBP1.1 billion, up from GBP1.03 billion a year earlier, buoyed by 15% sales growth in retail revenue, and 13% growth in wholesale revenue. It said licensing revenue was down 3% on an underlying basis.
On a reported basis, retail and wholesale sales were up only 8%, while licensing revenue was down 18%. That marked a slowdown from the first quarter when it had reported underlying sales growth of 17%, or 9% on a reported basis.
It said sterling strength wiped around GBP75 million off its reported revenue for the first-half.
Burberry said demand in the first-half was driven by double-digit sales growth in Asia Pacific and the Americas, with travelling "luxury customers", particularly from Asia, driving that growth, buoyed by the relaunch of its heritage trench coat, leather bags and mens tailoring.
However, last month Burberry warned its investors that trading in its key markets is getting tougher, after it said growth slowed in the second quarter as its key travelling Chinese consumers splurged out less on its clothes and leather goods, and it warned that weak consumer confidence in Europe and slower Asian growth would weigh on its second half.
"We expect some downward pressure on the full year retail/wholesale margin, reflecting the negative impact of exchange rates, a more difficult external environment and continued investment in key initiatives to drive long-term profitable growth," the retailer said Wednesday.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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