Burberry Q1 results

Luxury Goods | Official Release

First quarter trading update and interim management report – 15 July 2009.

Burberry Group plc, the global luxury company, today reports on trading for the three months to 30 June 2009.

Official release including financial reports can be accessed here.

Angela Ahrendts, Chief Executive Officer, commented:

“Burberry has made a solid start to the year in what remains a challenging environment. We continue to execute on our strategies by product, region and channel, while driving operational and cost efficiencies. Our brand momentum, strong product designs and continuing back-of-house improvements mean that we are well-placed to deliver sustainable long-term growth.”

First quarter highlights

  • Total revenue down 4% underlying to STG229 million ($A469.7 million )
  • Retail revenue up 12% underlying, with comparable store sales flat year-on-year
  • Europe and Asia up double-digit, driven by UK and Korea
  • United States and Spain remain difficult
  • Wholesale revenue down 28% underlying in this small quarter
  • Licensing revenue down 3% underlying
  • Underlying licensing revenue to decline by 10-15%
  • Non-apparel and childrenswear performed strongly
  • Benefits from cost efficiency programme on track

Retail

Retail sales, which accounted for about two-thirds of total revenue in the period, grew by 12% on an underlying basis (up 28% reported). New space generated 8% of this growth, with Burberry Middle East contributing 4%.

Comparable store sales in the quarter were flat year-on-year, reflecting positive customer response to the Spring/Summer ranges, particularly to new accessory programmes and recent strategic initiatives, including mens tailoring, denim, sport and childrenswear. Europe and Asia both delivered double-digit percentage growth, with exceptional performances again in the UK and Korea (both helped by favourable currency movements). The United States and Spain remain more difficult markets, with comparable store sales in both markets again down double-digit in the quarter.

For the year as a whole, Burberry plans to open a net 10-15 mainline stores, with an increase in average selling space of 10-12%.

Wholesale

In what is the smallest quarter of the year for wholesale, revenue in the period declined by 28% on an underlying basis (down 21% reported).

Burberry is projecting wholesale revenue to be down by about 25% at constant exchange rates for the six months to 30 September 2009. This includes the impact of the closure of Thomas Burberry; the continued planned rationalisation of many small speciality accounts in Europe; and the conversion of Burberry Middle East from wholesale to retail. Excluding these actions and closures, first half wholesale revenue is planned down around 15% at constant exchange rates as wholesale customers adjust their inventory levels in line with current sales trends. Spain remains challenging.

A further three franchise stores were opened in the quarter in Emerging Markets, including the first Burberry store in Bahrain. China continues to perform strongly, while Russia and parts of the Middle East remain difficult.

Licensing

Total licensing revenue in the first quarter declined by 3% on an underlying basis (up 12% reported), benefiting from timing differences in royalty receipts, mainly in Japan.

In the year to March 2010, Burberry still expects underlying licensing revenue to decline by between 10% and 15%, although reported licensing revenue should increase year-on-year reflecting currency benefits.

Financial condition

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