11th Oct 2006 07:01
Burberry Group PLC11 October 2006 Burberry Group plc First Half Trading Update 11 October 2006. Burberry Group plc reports on trading for the six months ended30 September 2006. Financial Highlights • Total revenue increased 10% on an underlying* basis • Retail sales rose 23% underlying driven by new and existing stores • Wholesale revenues increased 1% underlying • Licensing revenue increased 5% underlying • Outlook for second half - Increased pace of retail expansion to include the opening of five stores and five concessions, resulting in an expected 14% average retail selling space gain in the second half and 13% for the financial year - Anticipate a mid single digit percentage increase in wholesale sales - Continue to expect underlying licensing revenue broadly flat relative to the previous year period Revenue by geographical origin (statutory accounts format) First Half£ million 2006 2005 Europe (excluding Spain) 127 115Spain 87 86North America 80 74Asia Pacific 98 80Total 392 355 Revenue by channel of distribution Second Quarter First Half Reported % change Reported % change£ million 2006 2005 Reported Underlying 2006 2005 Reported Underlying /07 /06 * /07 /06 * Retail 87 63 39 28 169 124 36 23Wholesale 144 152 (5) 1 182 191 (5) 1Licence 25 25 (1) 1 41 40 3 5Total 257 240 7 8 392 355 11 10 * Underlying figures exclude the financial effect of the Taiwan acquisition andthe portion of Burberry's business in Spain affected by the retail conversion,in both reporting periods. In addition, underlying figures are calculated at thesame exchange rates used in the 2005/06 year's reported results for the period.Burberry completed the acquisition of the operations and assets of itsdistributors in Taiwan in August 2005 (the "Taiwan acquisition") and initiatedactions related to the retail conversion in Spain during the third quarter of2005/06. Commenting on the trading results, Angela Ahrendts, Chief Executive Officer,stated, "Continued strength in outerwear and womenswear as well as theextraordinary consumer response to the launch of the Burberry Icons Collectionof luxury handbags have fuelled excellent retail performance across markets. Ourdistinctive 150th year anniversary advertising campaign and unprecedentededitorial coverage contributed to the sales momentum as drivers of storetraffic, customer acquisition and transaction value. As a whole, performance inthe first half is consistent with expectations for the full financial year." Total revenue Total revenue in the first half increased 10% on an underlying basis (i.e.adjusted for (i) the Taiwan acquisition, (ii) the portion of Burberry's businessin Spain affected by the retail conversion and (iii) exchange rate differences).The Taiwan acquisition and Spain retail conversion shift sales from Burberry'swholesale channel to its retail channel. In determining underlying performance,the financial effects of the relevant businesses are excluded from bothreporting periods. First half combined revenue for the Retail and Wholesalechannels by geographical market is presented below: First Half Retail and Wholesale Revenue by Geographical Market (Destination) Reported % change Region 2006/ 2005/ Reported Underlying 07 06 Europe (excluding 113 95 19 19 Spain) Spain 75 74 0 (3) North America 82 76 8 10 Asia Pacific 76 65 17 10 Other 6 5 21 21 Total 351 315 11 10 Retail Retail sales accounted for approximately 43% of total revenue in the period. Retail sales in the first half increased 23% underlying, 36% reported, driven bycontributions from existing and new stores. The Taiwan acquisition and Spainretail conversion contributed approximately 13 percentage points to the reportedgain. Comparable store sales increased 11% and average selling space increasedapproximately 12% year over year. During the half, the Group opened a total ofsix stores, a replacement store, a net five concessions and two outlets. In thesecond quarter, Burberry opened stores in Madrid (Spain), Kansas City(Missouri), Northbrook (Illinois), Hackensack (New Jersey) and Sydney(Australia). Concessions were added in the UK, Spain and Japan. Building on strong first quarter performance, retail sales accelerated in thesecond quarter. Underlying retail sales increased 28% on a 14% comparable storesales gain and 15% selling space addition in the quarter. In the US, existingstores, complemented by new store space, drove strong sales growth. Performanceat existing stores and concessions led excellent sales increases in ContinentalEuropean markets. The UK market achieved another double-digit gain on thestrength of existing stores and concessions. Asia achieved good underlyinggrowth led by existing stores in Hong Kong and other Southeast Asian markets. Wholesale Wholesale sales accounted for approximately 46% of total revenue in the firsthalf. Underlying wholesale sales increased 1%. In the context of good external demand,production delays in outerwear and a core handbag group constrained growth inthe half. Reported wholesale sales were also affected by the Taiwan acquisitionand Spain retail conversion, resulting in a 5% reported decline in the period.The US market experienced a moderate decrease primarily as a result of shippingdelays. In Spain, the ongoing challenges of the specialty store channel produceda moderate underlying sales decline during the period. Other European markets inaggregate achieved strong gains, with particular strength in Italy and Germany.Asia was broadly flat in the period, with initial shipments to Japan offsettingdeferred shipments to duty free and other customers. Emerging markets achievedstrong gains on the basis of new stores and excellent performance at existinglocations. In conjunction with a local franchise partner, the Group opened asecond store in Istanbul (Turkey) during the second quarter. Licensing Total licensing revenue in the first half increased 5% on an underlying basis,3% reported. In Japan, volume gains among ongoing licenses were offset by theeffect of licence terminations, resulting in a moderate underlying decline inrevenue. Good growth in product licence revenue was led by fragrances, whichbenefited from the successful launch of Burberry London for women in Spring 2006and the men's fragrance in Autumn 2006. Watches also continued to maintain goodprogress in the period. Second half outlook •Retail. Burberry has accelerated its retail expansion programme for the year. The Group plans to open nine Burberry stores, a net 10 concessions and four outlets in 2006/07 resulting in an expected 13% increase in average retail selling space for the financial year (excluding the effects of the Taiwan acquisition and Spain retail conversion). For the second half, average retail selling space is planned to increase approximately 14% through the addition of five stores and five concessions. Capital expenditure is expected to total approximately £50 million for the year. •Wholesale. On the basis of Spring/Summer 2007 merchandise orders received to date, Burberry anticipates a mid single digit underlying increase in wholesale sales for the second half of the year. •Licensing. The Group continues to expect licensing revenue broadly flat relative to the previous year period. In Japan, Burberry will continue its activities to reinforce brand positioning, which constrain volume growth. With respect to product licenses, Burberry looks forward to the launch of its new eyewear collection during the second half. Burberry will release interim results on 14 November 2006. Enquiries: Burberry 020 7968 0577 Stacey Cartwright CFOMatt McEvoy Strategy and IRJohn Scaramuzza Strategy and IR Brunswick 020 7404 5959 Susan GilchristLaura CummingsRobert Gardener The financial information contained in this Trading Update has not been audited. Certain statements made in this Trading Update are forward looking statements.Such statements are based on current expectations and are subject to a number ofrisks and uncertainties that could cause actual results to differ materiallyfrom any expected future results in forward looking statements. This announcement does not constitute an invitation to underwrite, subscribe foror otherwise acquire or dispose of any Burberry Group plc shares. Pastperformance is not a guide to future performance and persons needing adviceshould consult an independent financial adviser. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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