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Burberry Group PLC (BRBY)

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Tuesday 18 January, 2011

Burberry Group PLC

3rd Quarter Trading Update an

RNS Number : 6202Z
Burberry Group PLC
18 January 2011
 



18 January 2011                                                                                                           

 

Burberry Group plc

 

Third Quarter Trading Update

and Interim Management Statement

 

 

Burberry Group plc, the global luxury company, today reports on trading for the three months to 31 December 2010.

 

Highlights*

 

·     Total revenue up 27% underlying (up 30% reported)

-    Strong consumer demand in both retail and wholesale

-    Consistent double-digit growth across all product divisions

-    Double-digit comp growth across the Americas, Asia Pacific and Europe

 

·     Retail sales up 36% underlying (up 40% reported)

-    Comparable store sales growth of 14%

-    Acquired stores in China comp up over 30%

-    Outerwear and large leather goods drove about half of growth

 

·     Wholesale revenue up 15% underlying (up 15% reported)

-    Up 35% underlying excluding China

-    Second half underlying revenue now expected up high teens % excluding China

o Revenue upgrade of over £10m evenly split between Americas, Asia Pacific and Europe

o Strong consumer demand leading to higher in-season orders

 

·     Further strategic and operational progress

-    Seven mainline stores opened, including São Paulo, Brazil and Puebla, Mexico

-    Rapid integration of Chinese operations on track

o Digitally advanced flagship opened in Beijing

-    More dynamic replenishment capabilities supported growth

 

 

Angela Ahrendts, Chief Executive Officer, commented:

 

"The Burberry team delivered a 30% increase in revenue in the third quarter, with strong, consistent growth in both retail and wholesale and in every product division and region.  As a result, we now expect adjusted profit before tax for the current financial year to be at the top end of market expectations.  Ongoing initiatives in retail, digital, product development and new markets underpin our confidence in the future."

 

 

* Highlights exclude the discontinuing business in Spain affected by restructuring

Underlying change is calculated at constant exchange rates

 

Revenue by channel of distribution

 


Three months to 31 December


% change

 

£ million

2010

2009


reported FX

underlying

Retail*#

335

239


40

36

Wholesale*#

112

97


15

15

Licensing

23

26


(11)

(7)

   Total excluding Spain

470

362


30

27

Spain

10

18


-

-

   Reported total

480

380


27

24

* Q3 2009 restated to exclude discontinuing business in Spain affected by restructuring (retail £10m; wholesale £8m).  Q3 2010 Spain sales are retail £7m; wholesale £3m

# Burberry acquired its Chinese operations with effect from 1 September 2010.  Excluding China in both Q3 2009 and Q3 2010 gives underlying growth of 22% in retail and 35% in wholesale

 

Retail/wholesale revenue by destination excluding Spain*

 


Three months to 31 December


% change

 

£ million

2010

2009


reported FX

underlying

Europe#

133

117


13

17

Americas

141

115


24

19

Asia Pacific

150

89


68

59

Rest of World

23

16


42

39

   Total excluding Spain

447

337


33

30

* Excludes discontinuing business in Spain affected by restructuring

# Q3 2009 restated to include continuing parts of Spain business

 

The following commentary excludes the discontinuing business in Spain affected by restructuring.

 

Retail

Retail sales in the third quarter increased by 36% on an underlying basis (up 40% at reported FX).  New space generated 8% of this underlying growth, while China, which transferred from wholesale to retail on 1 September 2010, contributed a further 14%.

 

Comparable store sales in the third quarter grew by 14%, with mainline stores significantly outperforming.  The Americas, Asia Pacific and Europe all delivered double-digit comparable store sales growth, with particular strength in the UK, France, Hong Kong and Taiwan.  Comparable store sales growth in China was over 30% in the acquired stores.  These Chinese sales were not included in Burberry's 14% comparable growth for the quarter. 

 

In mainline retail, all four product divisions (non-apparel, women's, men's and children's) delivered strong, consistent growth, with outperformance from Prorsum, shoes, small leather goods and men's accessories.  Helped by improved replenishment capabilities, outerwear and large leather goods again accounted for about half of the growth.  This mix benefit contributed to a further increase in average price per unit sold.

 

 

During the third quarter, Burberry opened seven mainline stores, including São Paulo, Brazil; Puebla, Mexico; the first Brit store in Europe in Milan; and a flagship store in Beijing, showcasing its most advanced digital in-store technology.  For the second half, average selling space is expected to increase by about 25% as previously guided.  About 15% of this is in China (both acquired stores and new openings), with the balance of about 10% across other regions. 

 

Wholesale

Excluding China, wholesale revenue grew by 35% at constant exchange rates, benefiting from a re-phasing of deliveries into the third quarter from the fourth quarter compared to last year.  Earlier deliveries were driven by monthly flow of product and strong demand from end consumers.  Wholesale revenue including China increased by 15% at constant and reported exchange rates, as China transferred to retail. 

 

Reflecting improved consumer demand, Burberry now expects a high teens percentage increase in second half wholesale revenue at constant currency excluding China (previously up around 10%).  This revised guidance represents a revenue increase of over £10m, evenly split between the Americas, Asia Pacific and Europe.  Improved replenishment capabilities enabled Burberry to respond effectively to strong in-season orders.  The high teens expected growth also benefits by a low single-digit percentage from the first sales of the global collection in Spain.

 

For the second half, wholesale revenue including China is expected to increase by a mid single-digit percentage at constant currency (2009: £189m). 

 

Licensing

As expected, total licensing revenue in the third quarter decreased by 7% on an underlying basis (down 11% at reported FX).  Growth in the global product licences was offset by the impact of the planned termination of licences in menswear and Japanese non-apparel. 

 

For the full year, Burberry still expects underlying licensing revenue to decline by a mid single-digit percentage.  The yen hedge rate for the full year 2010/11 will give only a marginal benefit to reported numbers compared to 2009/10, with the exchange benefit already reported in the first half expected to reverse partly in the second half.  In December 2010, Burberry and Interparfums extended by one year certain terms of their fragrance licence.  

 

Financial condition

Except for the trading activities described above, there has been no significant change to the financial condition of the company. 

 

 

Enquiries

 

Burberry


020 3367 3524

Stacey Cartwright

EVP, Chief Financial Officer


Fay Dodds

Director of Investor Relations


Jenna Littler

Director of Corporate Relations


 

Brunswick


020 7404 5959

Nick Claydon



Laura Cummings



 

There will be a conference call for investors and analysts to discuss this update today at 9am (UK time).  The conference call can be accessed live on the Burberry website (www.burberryplc.com), with a replay available later today.

 

Burberry will release its Second Half Trading Update for the six months to 31 March 2011 on 19 April 2011.  It will announce its Preliminary Results for the year to 31 March 2011 on 26 May 2011.

 

Certain financial data within this announcement have been rounded.

 

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 of risks and uncertainties that could cause actual results to differ materially from any expected future results in forward-looking statements. 

 

This announcement does not constitute an invitation to underwrite, subscribe for or otherwise acquire or dispose of any Burberry Group plc shares.  Past performance is not a guide to future performance and persons needing advice should consult an independent financial adviser.

 

 

Notes to editors

 

·     Burberry is a global luxury brand with a distinctive British heritage, core outerwear base and one of the most recognised icons in the world.

 

·     Burberry designs and sources apparel and accessories, selling through a diversified network of retail, wholesale, licensing and digital channels worldwide.

 

·     Burberry has five strategic themes to underpin its growth: leverage the franchise; intensify non-apparel development; accelerate retail-led growth; invest in under-penetrated markets; and pursue operational excellence.

 

·     At 31 December 2010, Burberry had 173 retail stores, 175 concessions (excluding Spain), 46 outlets and 59 franchise stores.   

 

·     Burberry, which is headquartered in London, was founded in 1856.  It is listed on the London Stock Exchange (BRBY.L) and is a constituent of the FTSE 100 index.

 

·     The restructuring in Spain remains on track.  The global collection is being sold for the first time from Spring/Summer 2011 through selected wholesale accounts and concessions.

 

APPENDIX

 

Spain restructuring

 

As announced in February 2010, Burberry is restructuring its Spanish operations.  The global collection has been introduced from Spring/Summer 2011, with the final local collection being Autumn/Winter 2010.  The group result excluding the discontinuing business in Spain affected by restructuring is given below. 

 

Restatement of FY 2009/10


H2 2009/10


FY 2009/10

 

£ million

As reported

Excluding Spain


As reported

Excluding Spain

Retail/wholesale






Retail

437.2

415.3


748.8

710.1

Wholesale

217.5

189.2


433.6

377.5

Adjusted retail/ wholesale revenue

654.7

604.5


1,182.4

1,087.6







Cost of sales

(246.2)

(219.2)


(475.9)

(423.9)

Gross margin

408.5

385.3


706.5

663.7

Gross margin

62.4%

63.7%


59.7%

61.0%







Operating expenses

(318.8)

(299.2)


(568.8)

(526.0)

Adjusted retail/wholesale operating profit

89.7

86.1


137.7

137.7







Operating expenses as % of sales

48.7%

49.5%


48.1%

48.3%

Adjusted operating margin

13.7%

14.2%


11.6%

12.7%







Licensing profit

43.9

43.9


82.2

82.2

Adjusted operating profit

133.6

130.0


219.9

219.9

Spain

-

3.6


-

0.0

Restructuring costs

(44.6)

(44.6)


(48.8)

(48.8)

Reported operating profit

89.0

89.0


171.1

171.1







 

In the current financial year, Burberry is disclosing the results of this Spanish business separately to aid investors' understanding of the ongoing global business.  These Spanish losses will be excluded from adjusted operating profit and adjusted profit before tax.

 

In FY 2011/12, the sales of the global collection will be reported in continuing operations - in retail, wholesale and Europe as appropriate.  As noted above, wholesale revenue for the six months to 31 March 2011 will include a small contribution from the first sales of the global collection in Spain.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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