12th Oct 2005 07:00
Burberry Group PLC12 October 2005 Burberry Group plc First Half Trading Update 12 October 2005. Burberry Group plc reports on trading for the six months ended30 September 2005. Financial Highlights • Total revenues increased 3% on an underlying* basis • Retail sales rose 9% underlying driven by new and refurbished stores • Underlying wholesale revenues declined 1%, consistent with previous guidance • Licensing revenue increased 3% underlying driven by global licenses • Outlook for second half - On schedule to increase average retail selling space by 9% for the financial year - Moderate underlying wholesale sales decline expected - Anticipate licensing revenue growth consistent with first half First Half to 30 September % change -------- -------- --------- -----------£ million 2005 2004 Reported Underlying* -------- -------- --------- ----------- Retail 124 111 12 9Wholesale 191 197 (3) (1)Licence 40 39 1 3 -------- -------- --------- ----------- Total 355 347 2 3 *Underlying figures exclude the financial effect of Burberry's Taiwan-relatedbusiness in both reporting periods and are calculated at the same exchange ratesused in the 2004/05 year's reported results for the period. Burberry completedthe acquisition of the operations and assets of its distributors in Taiwan inAugust 2005 (the "Taiwan Acquisition") Commenting on the trading results, Rose Marie Bravo, Chief Executive, stated,"Burberry took several important strategic actions in the first half. We broughtour Taiwan business under direct control, continued to rebalance the US channelmix, set the groundwork for direct distribution in Spain and announced anexciting new eyewear licence. In retail, with outerwear just entering highseason, our Prorsum collection is the highlight of autumn/winter 2005 to date." Total revenues Total revenues in the first half increased by 3% on an underlying basis (i.e.excluding the financial effect of the Taiwan Acquisition and exchange ratedifferences), 2% reported, compared to the same period last year. The TaiwanAcquisition results in a sales shift from Burberry's wholesale channel to itsretail channel. Therefore, in determining underlying performance, the financialeffect of the Group's Taiwan-related business is excluded from both reportingperiods. Revenue growth by geographical region is shown below: % change Region underlying ------------ ---------- North America 5 Europe (1) Asia Pacific 5 Retail Retail sales accounted for approximately 35% of total revenue in the period. Retail sales in the first half increased 9% underlying, 12% reported, driven bycontributions from new and refurbished stores. The acquisition of 12 retaillocations in Taiwan during August 2005 also contributed to reported gains.During the half, the Group opened a Burberry store in San Antonio, replacementstores in Zurich and Taipei and an outlet store. Burberry also opened sixconcessions, in Spain and Asia. Several store refurbishments were completed inthe half including those in Frankfurt, Munich, Boston, Denver, Philadelphia,Washington DC and Westchester. On a year over year basis, average selling spaceincreased approximately 8% in the half. Retail sales performance varied by region in the half. In the US, solid salesgrowth was driven by contributions from new stores, complemented by gains atexisting stores. Against strong comparatives, new stores and concessions drovesales growth in Continental European markets. The UK market, affected byexternal factors, continued to be soft. In Asia, Korea achieved a small gain inthe half notwithstanding the difficult retail environment. Led by existingstores, Hong Kong and Southeast Asian markets generally achieved strong gains inthe period. Wholesale Wholesale sales accounted for approximately 54% of total revenue in the firsthalf. Consistent with previous guidance, underlying wholesale sales declined 1% in thehalf. Affected by the Taiwan Acquisition, reported wholesale sales decreased 3%.The US market experienced a moderate decline as a result of Burberry's ongoingadjustment of the brand's wholesale/retail balance in this market, as well ascaution on the part of certain wholesale customers. In Europe, soft demand inSpain produced a moderate sales decline during the period. At the same time,other Continental European markets achieved strong gains in the half. The UKcontinued to be soft. Asia achieved good underlying growth in the period.Boosted by new stores, emerging markets achieved strong gains. In conjunctionwith local partners, the Group opened franchised stores in Istanbul (Turkey),Warsaw (Poland), Sao Paolo (Brazil), Jeddah (Saudi Arabia) and Riyadh (SaudiArabia) during the first half. Licensing Total licensing revenue in the first half increased by 3% on an underlyingbasis, 1% reported. Flat Japan-related royalties reflected a small volumedecline resulting from licence transitions/cancellations, Burberry's programmeto restrict selectively distribution of certain products and a soft apparelmarket. This was largely offset by an increase in certain royalty rates.Excluding the effect of cancelled licenses, total underlying licensing revenueincreased 6% in the half. Licensing revenue growth also reflected solid gains from Burberry's globallicenses. Fragrance-related royalty growth slowed in the half reflecting strongcomparatives resulting from the Burberry Brit for men launch in the previousyear and the anniversary of the royalty rate increase. Burberry recently announced a new ten-year eyewear licence with Luxottica Group.The first collections under the new agreement are expected to be shipped in late2006. Second Half Outlook • Retail. Retail expansion continues on track. The Group opened a store in San Diego (California) in early October and also plans to open Burberry stores in Naples (Florida) and Palm Beach Gardens (Florida) and four outlet stores in the period. Retail selling space is planned to increase by approximately 9% for the financial year, excluding the effect of the Taiwan Acquisition. • Wholesale. On the basis of Spring/Summer 2006 merchandise orders received to date, Burberry anticipates a moderate underlying decline in wholesale sales for the second half of the year. As stores are added in the US, the Group continues to rebalance its channel mix in that market. Burberry also anticipates soft demand in Spain and the UK in the second half. In addition, the Group expects to begin the transition of portions of its womenswear business in Spain from a wholesale to a retail concession format in the financial fourth quarter, which will affect reported results. As a result, sales will shift both in terms of timing and channel relative to the previous year. Following a period of transition, Burberry expects the conversion to enhance its positioning and financial performance in this market. • Licensing. Burberry anticipates licensing revenue growth broadly consistent with that of first half. In Japan, Burberry will continue its activities to improve brand positioning, which restrain volume growth. Revenues will also be affected by the initial phase of the transition to a new eyewear licence, which will commence in the second half. With respect to other licenses, Burberry expects trends to be consistent with those of the first half of the year. Burberry will release interim results on 15 November. Enquiries: Burberry 020 7968 0577Stacey Cartwright CFOMatt McEvoy Strategy and IRJohn Scaramuzza Strategy and IR Brunswick 020 7404 5959Susan GilchristRobert GardenerAlexandra Tweed 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 or GUS plc shares.Past performance 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:
Burberry