15th Jan 2014 08:35
LONDON (Alliance News) - British luxury fashion retailer Burberry Group PLC Wednesday said that retail revenue rose 14% in the third quarter, while comparable sales rose 12%, as the group continues to be driven by Asia, online business, and sales of its outerwear and large leather goods.
As the group prepares to lose Chief Executive Officer Angela Ahrendts in the next few months, and hand over to Christopher Bailey, the high-end brand said that retail revenue increased to GBP528 million in the three months to December 31, 2013, a 14% increase at both constant and reported currency rates.
The group said that sales were boosted by the addition of new space during the quarter, and double-digit growth in Asia Pacific, and mid to high single-digit growth in the Americas and Europe, Middle East, India and Africa.
However Ahrendts said the group is facing foreign-exchange headwinds, due to the strong pound, which it expects to continue during the remainder of the year, and beyond.
"At current levels, exchange rates will be a significant headwind in the second half and beyond, and the macro environment remains uncertain, but we are confident that our proven strategies will continue to deliver long-term value for shareholders," she said in a statement.
The group left its full-year guidance for its retail division unchanged, from the detailed outlook it gave in its half-year report.
Burberry said it still expects retail revenues to rise by a low- to mid-single digit percentage in the full year. The group said that it expects its wholesale revenue, excluding beauty, to increase by mid-to high single-digit percentage in the second half, and licensing revenues to grow for the year as a whole at constant currencies.
Burberry continues to invest in its under-developed beauty division, having bought it in-house last year, as it is an area it sees as a key growth driver going forward. The company said that for the current year as a whole, beauty is planned to deliver wholesale revenue of about GBP140 million, and a slightly lower operating profit of around GBP10 million, due to additional marketing spend on its fragrance launches.
In the previous financial year, the group reported an operating margin of 17%, a figure it aims to increase in this financial year, which ends March 31.
Burberry said that the key drivers of retail growth in the third quarter ended December 31, 2013, remained consistent with other recent quarters when it has said that while traffic remained weak offline, it continues to grow online. This is a consumer trend that Ahrendts has said she expects to continue, if not accelerate in the future, especially in Asia.
The group said that in the third quarter the conversion rate increased both offline and online, although its online business continues to outperform, enhanced by investments in areas such as collect-in-store, fulfilment and additional languages on its website.
Product-wise, Burberry said that sales of its outerwear and large leather goods, contributed to about half of its mainline growth in the third quarter, while men accessories and tailoring continued to grow strongly, boosted by a marketing campaign and recent launch of Brit Rhythm for Men, its first fragrance under direct ownership. It said that the high-profile launch helped Burberry Brit apparel increase penetration slightly, particularly in menswear and womens outerwear
Geographically, Burberry said that Asia Pacific again delivered double-digit percentage comparable sales growth, led by Greater China and a continued improvement in Korea. It said its performance was robust in the Americas, UK, France and Germany, while Italy remained weak.
The upmarket fashion group continued with expansion in the third quarter, opening a net five mainline stores, including two in China, a fourth store in Mexico and its first standalone Burberry Beauty Box in central London. In addition it also acquired three stores in Thailand, one store and two concessions previously operated by a franchisee, as it ups its investment in 'under-penetrated markets'.
Shares in Burberry were up 6.5% Wednesday morning at 1,565.49 pence per share, making it the biggest gainer in the FTSE 100.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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