Burberry announced their first-half results last week, where there was a small rise in their net profit after the luxury house bought back its beauty license last year…. but in promising news in what could be described as a tough year for the luxury industry, sales exceeded £1 billion for a historic first time.
Net profits rose to £113 million, up from £85 million last year, whilst sales jumped by an incredible 17 per cent to £1.03 billion.
The Brtish luxury house lowered its guidance for profit from the beauty division, forecasting operating profit of £10 million in the year, compared with previous guidance of £25 million.
Burberry have committed to their Beauty division, and they are expecting to deliver wholesale revenue of £140 million and incremental retail/wholesale profit of £10 million.
Accessories accounted for 37 per cent of revenue in the first half, whilst fashion accessories outperformed, reflecting success in the key shape strategy and solid leather. Mens accessories were 20 per cent of total accessories revenue.
Burberry opened 14 mainline stores and closed eight during the first half. Store openings were biased towards high potential markets including China, the Middle East, India, Brazil and Mexico.
With double-digit comparable store sales growth in mainland China, Burberry continues to see the benefit of its investment in this market following the acquisition three years ago. 20 of the 50 acquired stores have been closed and 41 stores opened, to give a total of 71 stores in 36 cities.
Whilst Burberry continue to work with established and emerging markets, they are also developing their operations in under-penetrated markets such as Colombia, Chile, Mexico and Thailand. In the second half, Burberry are expected to open another 25 mainline stores globally and close about 15.
When it comes to regional growth, the Asia-Pacific continues to be the driver, with retail accounting for about 85 per cent of first half revenue in Asia Pacific.
EMEIA (Europe Middle East, India and Africa), reported double-digit percentage comparable store sales growth. The UK improved compared to last year, France and Germany remained robust and Italy had slight growth.
The Americas retail contributed nearly 60 per cent of revenue in the Americas, with high single-digit percentage comparable store sales growth in the half.
“We are proud to announce a first-half performance that saw Burberry’s revenue exceed £1 billion for the first time, reflecting the continuing strength of our global brand momentum,” Angela Ahrendts said of the results.
“We remain focused on executing our retail, digital and marketing strategies in the all-important third quarter and in what remains an uncertain macro environment. The senior team continues to balance brand appropriate revenue growth, selective investment and infrastructure efficiencies to drive sustainable profit growth across the portfolio, especially with the significant long-term potential of our fifth product division, Beauty.”
Burberry’s CEO Angela Ahrendts will step down next year to join Apple, and the company will use this time to shift their organisational structure to better allow CEO-designate Christopher Bailey to lead the company in his dual role as corporate and creative head.
By Cassandra Murnieks
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