14th Nov 2013 14:33
LONDON (Alliance News) - Burberry Group PLC Thursday reported higher profits and revenues for the first half of the year, boosted by strong sales of outerwear and leather goods, and said it expects growth across most of its businesses in the full-year.
The British luxury fashion house reported a pretax profit of GBP159.0 million in the six months to September 30, up sharply from GBP112 million a year earlier when it had booked a GBP73.8 million charge for terminating its fragrance and beauty license relationship and bringing the beauty division in-house.
Excluding all one-off charges, pretax profit was GBP174 million, marginally up from GBP173 million last year, but more than Burberry had previously guided. It had previously said it expected adjusted pretax profit to be down on the year in the first half.
Reflecting its confidence, Burberry increased its interim dividend by 10% to 8.8 pence, as first-half revenues rose 17% to GBP1.03 billion, driven by strong worldwide demand for its luxury coats, accessories and fragrances, particularly from Asia.
The company gave a detailed outlook. It expects its retail revenues to rise by a low-to mid-single digit percentage in the full year; its wholesale revenue to increase by a mid-to high single-digit percentage in the second half; its licensing revenues to grow for the year as a whole at constant currencies; while operating margin at constant currency will rise modestly from the 17.1% it achieved last year.
The growth is expected to be driven by the US market, Asia travel retail and emerging markets in the second half of the year, outgoing Burberry Chief Executive Angela Ahrendts told journalists Thursday.
Ahrendts also said that the group sees digital and beauty as the two key growth drivers going forward, having recently collaborated with technology giants Google and Apple.
"We brought beauty in-house because it was heavily undeveloped compared to peers. We continue to over-invest in beauty as we believe it as a significant opportunity and a strong driver going forward," she said.
Burberry reaffirmed its expectations that beauty wholesale revenue will be about GBP140 million for this fiscal year, but said that it expects a slightly lower operating profit of around GBP10 million due to additional marketing spend.
"We need time, as its only been six months since we took back the business. This is a transitional period, so it is not representative of the scale we dream of," Ahrendts told journalists, adding "We will offset this shortfall elsewhere in the business."
Ahrendts said that within the beauty division, fragrance currently accounts for 95%, while beauty accounts for a mere 5%. In September, Burberry launches its first fragrance under direct ownership, Brit Rhythm for Men, in retail and its key department store partners.
Ahrendts also said that Burberry is currently developing its own skincare range, but refused to put a date on the launch of it. "Our focus has been on fragrances, then colour, and then it will be skincare. We are developing skincare products, but the launch will not be within the next 12 months."
Burberry said its online business outperformed in all regions, and for its stores, flagship markets performed well, driven by traveling luxury customers.
"Its perfectly normal that you will see online growing more than offline, as it is the trend in retail going forward... if anything it will only excel in Asia," said Ahrendts.
The group said it recently acquired three stores previously operated by a franchisee in Thailand, which it considers a high-growth market. "We've got Thailand back so we are focusing heavily on South East Asia. We still see Japan as a terrific opportunity post 2015," Ahrendts told journalists.
Burberry said that trading in France and Germany remain robust, while weakness in Dubai was down to soft tourist traffic.
The group said that within the Americas, it will focus store expansion outside of the US, in countries like Brazil and Mexico.
It said that it opened 14 mainline stores during the first half, mainly in high potential markets, while its click-and-collect service is now available from 80 locations globally.
Shares in Burberry fell sharply last month, after Ahrendts announced her surprise departure for Apple, with Chief Creative Officer Christopher Bailey taking the helm.
Burberry shares have since recovered, and were up 1.5% at 1,485.00 pence per share Thursday afternoon.
Bailey will replace Ahrendts when she leaves in the middle of 2014 for her new position at the technology giant as senior vice president head of retail and its online stores.
"The business has never been stronger and Christopher has never been more ready. I think it will go down as one of the greatest succession moves in the sector," Ahrendts told journalists Thursday.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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