16th Jan 2007 07:01
Burberry Group PLC16 January 2007 Burberry Group plc Third Quarter 2006/07 Trading Update 16 January 2007. Burberry Group plc reports on trading for the third quarterended 31 December 2006. Financial Highlights • Total revenue increased 25% on an underlying* basis, 22% reported• Retail sales increased 24% underlying driven by existing and new stores• Wholesale revenue increased 33% underlying, partially driven by shift in timing of shipments - Updated second half growth expectations to low-to-mid teen underlying percentage increase• Licensing revenue increased 12% underlying - Currently anticipate mid-to-high single digit underlying percentage increase for second half Revenue by geographical origin (statutory accounts format) Third Quarter ___________________£ million 2006/07 2005/06 _______ _______Europe (excluding Spain) 59 46Spain 23 15North America 71 60Asia Pacific 54 48 _______ _______Total 206 168 Revenue by channel of distribution Third Quarter Nine months __________________________________________ __________________________________________ Reported % change Reported % change _________________ ______________________ _________________ ______________________£ million 2006/07 2005/06 Reported Underlying* 2006/07 2005/06 Reported Underlying* _______ _______ ________ ___________ _______ _______ ________ ___________ Retail 143 115 25 24 312 242 29 24Wholesale 43 36 22 33 225 229 (1) 6Licence 19 18 7 12 60 58 4 7 _______ _______ ________ ___________ _______ _______ ________ ___________Total 206 168 22 25 597 529 13 14 * Third quarter underlying figures exclude the financial effect of the portionof Burberry's business in Spain affected by the retail conversion, in bothreporting periods. In addition, nine month underlying figures also include thefirst half adjustment for the Taiwan acquisition. For both periods, underlyingfigures are calculated at the same exchange rates used in the 2005/06 reportedresults. Burberry initiated actions related to the retail conversion in Spainduring the third quarter of 2005/06. Commenting on the trading results, Angela Ahrendts, Chief Executive Officer,stated, "This outstanding quarter has been led by Burberry's strong retailperformance. These results are a credit to the extended efforts of the team inexecuting our core strategies, specifically in innovating outerwear,intensifying the luxury accessory offering and implementing operationalenhancements. This performance is consistent with expectations for the financialyear." Total revenue Total revenue in the third quarter ended 31 December 2006 increased 25% on anunderlying basis (i.e. adjusted for (i) the portion of Burberry's business inSpain affected by the retail conversion and (ii) exchange rate differences). TheSpain retail conversion shifts sales from Burberry's wholesale channel to itsretail channel. In determining underlying performance, the financial effect ofthe affected business is excluded from both reporting periods. Total reportedrevenue increased 22%. Adverse exchange rate movements reduced the reported gainby approximately seven percentage points. Third Quarter Retail and Wholesale Revenue by Geographical Market (Destination) Reported % change __________________ _____________________Region 2006/07 2005/06 Reported Underlying________________________ _______ _______ ________ __________Europe (excluding Spain) 47 37 26 26Spain 22 14 60 8North America 72 61 18 30Asia Pacific 42 37 15 21Other 4 2 113 113 _______ _______ ________ __________Total 186 150 24 26 Retail Retail sales accounted for approximately 70% of total revenue in the period. Retail sales in the third quarter increased 24% underlying, 25% reported.Comparable store sales increased 13% and average selling space increasedapproximately 14% underlying in the quarter. The Spain retail conversioncontributed approximately eight percentage points of the reported gain. Adverseexchange rate movements, primarily US dollar, reduced the reported gain byapproximately seven percentage points. During the quarter, Burberry openedstores in Northern Los Angeles (California) and Vienna (Austria), fiveconcessions and one outlet store. Retail performance was consistently strong across the regions. In the US,existing stores and new store space drove strong sales gains. New spaceadditions and gains at existing stores and concessions resulted in excellentsales increases in Continental European markets. The UK market continued toachieve double-digit gains on the strength of existing space. Asia Pacificachieved strong sales growth led by existing stores in Hong Kong, Korea andother Southeast Asian markets. Several factors underpinned the retail strength. In the product arena,outstanding outerwear performance, driven by updated styles and balancedassortments, led gains. New luxury handbag styles and Burberry's runwaycollection also experienced excellent demand. In-stock positions improved as aresult of implementation of a basic replenishment programme. Increased frequencyof new product flow to stores resulted in fresher merchandise assortmentsrelative to the previous year period. In the fourth quarter, Burberry plans to open stores in Manchester (UK) andSeville (Spain), a new concept store in Prague (Czech Republic) and an outlet.The Group expects to add approximately 14% average underlying retail sellingspace for the second half and 13% for the financial year. Wholesale Wholesale sales accounted for approximately 21% of total revenue in the period. In the quarter, total wholesale sales increased 33% underlying, 22% reported. Ashift in the timing of selected shipments from the first half to the thirdquarter boosted gains for the current period. The third quarter of eachfinancial year is a small wholesale quarter with the large majority of spring/summer merchandise shipments concentrated in the fourth quarter. The Group anticipates a low-to-mid teen underlying percentage increase inwholesale sales for the second half. The improved outlook reflects initialsuccess of the basic replenishment programme and incremental orders associatedwith the new market calendar. In conjunction with local franchise partners, the Group opened stores in Kiev(Ukraine) and Mexico City (Mexico) during the quarter. Licensing Licensing revenue in the quarter increased 12% on an underlying basis, 7%reported. In Japan, good volume gains among ongoing licences offset the effectof licence terminations, producing a solid gain for the quarter. Excellentgrowth in product licence revenue was led by fragrances, which continued tobenefit from the 2006 Burberry London fragrance launches, and strong progress inwatches. Burberry currently anticipates a mid-to-high single digit underlyingpercentage increase in licensing revenue for the second half. Reported figureswill continue to be affected by adverse exchange rate movements. Operational efficiency The Group recently progressed two significant activities designed to enhance theGroup's long-term operating efficiency. Following a proposal made in September2006, the Group announced the expected closure of a Welsh manufacturing facilityin March 2007. This will result in a cash cost of approximately £3.5 million tocover an enhanced redundancy package and outplacement and training services foraffected employees, and a non-cash expense of £1.7 million associated with assetwrite-offs, for a total charge of approximately £5.2 million in the currentfinancial year. Expense savings associated with additional manufacturingefficiencies are expected to be approximately £1.5 million annually. With respect to its central operations, Burberry entered into a lease for aglobal headquarters. Located in central London (Westminster), the site willallow the Group to consolidate its global operations, including design,merchandising, marketing, supply chain, finance and executive and administrativefunctions, within a single facility. These functions are currently divided amongfive buildings in London. The relocation is expected to take place in late 2008. Burberry will provide a second half trading update on 17 April. 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. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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