12th Apr 2006 07:01
Burberry Group PLC12 April 2006 Burberry Group plc Second Half Trading Update 12 April 2006. Burberry Group plc reports on trading for the six months ended 31March 2006. Highlights • Retail sales increased 13% on an underlying(1) basis driven by new and existing stores - In the fourth quarter, underlying retail sales increased 16% • Wholesale sales decreased 7% underlying, in line with expectations • Licensing revenue increased 8% underlying • Total revenue increased 3% underlying Revenue by geographical origin (statutory accounts format) Second Half Full Year -------------------------------------------- ------------------------------------------------- Reported(2) % change Reported(2) % change --------------- ------------------------- ------------------- ------------------------- £ million 2005/06 2004/05 Reported Underlying(1) 2005/06 2004/05 Reported Underlying(1) ------- ------ -------- ------------ ------- ------- -------- ------------ Europe 117 120 (3) (3) 232 239 (3) (3)Spain 68 80 (14) (7) 156 170 (8) (5)North America 100 90 11 5 177 158 12 6Asia Pacific 105 78 35 21 189 149 27 20 ------- ------ ------ ------- ------- ------- -------- -------Total 390 368 6 3 753 716 5 3 Revenue by channel of distribution Second Half Full Year -------------------------------------------- ------------------------------------------------- Reported(2) % change Reported(2) % change --------------- ------------------------- ------------------- ------------------------- £ million 2005/06 2004/05 Reported Underlying(1) 2005/06 2004/05 Reported Underlying(1) ------- ------ -------- ------------ ------- ------- -------- ------------Retail 196 155 27 13 325 265 22 11Wholesale 152 174 (12) (7) 347 372 (7) (4)Licence 41 39 6 8 81 78 3 6 ------- ------ ------ ------- ------- ------- -------- -------Total 390 368 6 3 753 716 5 3 Commenting on the trading results, Rose Marie Bravo, Chief Executive, stated,"Retail operations were the highlight of Burberry's fourth quarter. Consumers'favourable response to spring merchandise, particularly womenswear, and anexciting advertising campaign contributed to the strong retail performance. Atthe same time, the strategically important shift to concession format for asignificant portion of our business in Spain was completed. During the period,we also successfully launched a major new fragrance, Burberry London." (1) Underlying figures exclude the financial effect of 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 2004/05 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. (2) Calculated at average annual exchange rates. Total revenue Total revenue in the six months to March 2006 increased 3% on an underlyingbasis (i.e. adjusted for (i) the Taiwan Acquisition, (ii) the portion ofBurberry's business in Spain affected by the retail conversion and (iii)exchange rate differences). The Taiwan Acquisition and Spain retail conversionshift sales from Burberry's wholesale channel to its retail channel. Indetermining underlying performance, the financial effects of the relevantbusinesses are excluded from both reporting periods. Total reported revenueincreased 6% in the half. Retail Retail sales in the second half increased 13% underlying, 27% reported, drivenby contributions from newly opened and existing stores. The acquisition of 12retail locations in Taiwan during August 2005 and the retail conversion ofwomenswear shop-in-shops in the stores of a major customer in Spain duringFebruary 2006 contributed approximately seven percentage points of the reportedgain. In addition to the two stores, two outlets and two concessions opened inthe third quarter, the Group opened a store in Naples, Florida, three outletsand a net one concession during the fourth quarter. On a year on year basis(excluding Taiwan and Spain), average net retail selling space increasedapproximately 9% in the half, and 8% for the full financial year. In the fourth quarter, retail sales growth accelerated relative to that of thethird quarter, producing a 16% underlying increase. In the US, new andrefurbished stores largely drove sales growth. The majority of ContinentalEuropean markets achieved strong gains driven by new stores and momentum atexisting stores. In the UK, existing stores produced a double digit gain in theperiod. Asia demonstrated continued underlying strength. Sales in Koreacontinued to firm, resulting in a modest gain for the quarter. Hong Kong andSoutheast Asia achieved robust gains primarily on the performance of existingstores. Wholesale In line with expectations, total wholesale sales decreased by 7% on anunderlying basis, 12% reported, during the second half. Primarily as a result ofthe ongoing adjustment of the brand's wholesale/retail balance in the US, salesin this market declined in the half. In Spain, soft demand resulted in asignificant underlying sales decline during the period. Fuelled by existingaccounts, other Continental European markets achieved strong gains in the half.The UK continued to be challenging. In Asia, timing differences negativelyaffected shipments to some markets. Boosted by new stores, emerging marketsachieved strong gains. In conjunction with local partners, the Group opened fivefranchise stores in the half, including stores in Abu Dhabi (UAE) and Cancun(Mexico) in the fourth quarter. Licensing Total licensing revenue in the second half increased 8% on an underlying basis,6% reported. In Japan, the high single digit increase in underlying revenueslargely reflected royalty rate increases as Burberry continues its initiativesto enhance brand positioning in that market. Global product licences achieved asolid underlying increase in the half. In February, Burberry launched a newmajor fragrance, Burberry London, which enters most large consumer marketsduring spring 2006. 2006/07 outlook In line with the ongoing execution of its core growth strategies, Burberry'splans for the 2006/07 financial year include: • Retail. A minimum 10% underlying increase in average net retail selling space (excluding the impact of the Taiwan Acquisition and Spain retail conversion). The majority of space expansion will be concentrated in the US and Asian markets. • Wholesale. First half wholesale sales up a low single digit percentage underlying and reported relative to the comparative period based upon orders received to date for the Autumn/Winter 2006 season. • Licensing. Broadly flat underlying licensing revenue relative to 2005/06 - Revenues from Japan are expected to experience a moderate underlying decline for the year as a result of licence transitions and Burberry's other ongoing efforts to enhance brand positioning in this market. - Global product licenses are expected to produce strong gains. - On a reported basis, the Group will also experience a significant negative exchange rate comparison. • Project Atlas. With the initial year of Burberry's five-year infrastructure redesign programme drawing to a close, the Group has made good progress in implementation while having the opportunity to evaluate the initial project scope and assumptions. This first phase of work has identified additional opportunities in terms of project scope and implementation phasing. The overall financial outline of the programme remains unchanged with an approximate £50 million investment during the first three years generating in excess of £20 million annually in expense savings by the project's third year. Expected expense benefits for the 2006/ 07 financial year are currently anticipated to be a minimum of £5 million. A further update will be provided with the Group's preliminary results announcement. Burberry will release its preliminary results for the year ended 31 March 2006on 25 May 2006. Enquiries: Burberry 020 7968 0577Stacey Cartwright CFOMatt McEvoy Strategy and IRJohn Scaramuzza Strategy and IR Brunswick 020 7404 5959Susan 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. Appendix Revenue by geographical destination Second Half Full Year -------------------------------------------- ------------------------------------------------- Reported(2) % change Reported(2) % change --------------- ------------------------- ------------------- ------------------------- £ million 2005/06 2004/05 Reported Underlying(1) 2005/06 2004/05 Reported Underlying(1) ------- ------ -------- ------------ ------- ------- -------- ------------Europe 111 104 7 7 217 206 5 5Spain 61 71 (15) (6) 135 150 (10) (6)North America 103 93 10 4 183 166 11 5Asia Pacific 110 95 15 3 206 187 11 4Other 6 4 49 49 11 7 63 63 ------- ------ ------ ------- ------- ------- -------- -------Total 390 368 6 3 753 716 5 3 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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