Burberry Group PLC BRBY First Half Trading Update

  Burberry Group PLC (BRBY) - First Half Trading Update

RNS Number : 4383O
Burberry Group PLC
11 October 2012






11 October 2012



                              Burberry Group plc

                                      

                          First Half Trading Update



First half highlights



· Total revenue £883m, up 8% underlying



· Retail revenue £577m, up 10% underlying

- Comparable store sales growth 3% (Q1: 6%; Q2: 1%)

- Q2 lower footfall countered by higher quality sales and average spend

- Prorsum and London penetration up six percentage points

- New mens tailoring and mens accessories performed strongly

- Hong Kong, France and Germany robust; UK and China slowed in Q2



· Wholesale revenue £253m, up 5% underlying

- In line with guidance

- H2 underlying wholesale revenue expected to be broadly unchanged



· Licensing revenue £53m, down 5% underlying

- Consistent with full year guidance of broadly unchanged revenue
year-on-year

- H2 global launch of The Britain watch

- Fragrance and beauty to be directly operated from 1 April 2013



· Ongoing investment in retail

- 13 new mainline stores

- Openings in flagship markets including Milan, Rome, Hong Kong and Regent
Street, London

- H2 average retail selling space expected to increase by about 14%

- FY capital expenditure plans unchanged at £180-200m





Angela Ahrendts, Chief Executive Officer, commented:



"Against record prior year comparatives, Burberry delivered 8% total revenue
growth and 10% retail growth in the first half, albeit slowing in the second
quarter. In a more challenging external environment, footfall declined but
brand momentum remained strong, particularly with our higher spending luxury
consumer.



Our highly experienced team remains very focused on the consistent execution
of our key strategies, engaging consumers through innovative retail and
digital marketing initiatives as we enter the most important quarter of the
year. We continue to invest for long term growth in flagship and emerging
markets, while tightly controlling discretionary spend."



Underlying change is calculated at constant exchange rates. Certain financial
data within this announcement have been rounded.

Revenue by channel of distribution



                                             % change
£ million                  2012 2011  reported FX underlying
Retail
- Q1                        280  245           14         14
- Q2                        297  283            6          7
Six months to 30 September  577  528            9         10
Wholesale
- Q1*                       102   95            8          9
- Q2*                       151  153          (1)          3
Six months to 30 September  253  248            2          5
Licensing
- Q1                         26   27          (2)        (5)
- Q2                         27   27          (4)        (5)
Six months to 30 September   53   54          (3)        (5)
Total revenue
- Q1                        408  367           11         11
- Q2                        475  463            3          5
Six months to 30 September  883  830            6          8



Q1 is the three month period to 30 June; Q2 is the three month period to 30
September

*Q1 and Q2 2012 wholesale revenue growth affected by re-phasing of deliveries
into Q1 from Q2





Retail/wholesale revenue by region



              Six months to 30 September         % change
£ million              2012         2011  reported FX underlying
Asia Pacific            299          266           13         11
Europe                  272          271            1          8
Americas                203          190            7          5
Rest of World            56           49           14         14
Total                   830          776            7          8



Revenue in the first half increased by 8% on an underlying basis. Retail
revenue increased by 10%, with wholesale up 5% and licensing down 5%, both
consistent with guidance. Retail/wholesale operating margin in the six months
to 30 September 2012 is now expected to be at least in line with the same
period last year (14.9%), rather than lower as previously guided. This
reflects the quality of the revenue performance and tight control of
discretionary spend.





Retail



Against record prior year comparatives, retail sales in the first half
increased by 10% on an underlying basis (up 9% at reported FX). Comparable
store sales growth was 3% (Q1: 6%; Q2: 1%), with the balance from new space
(Q1: 8%; Q2: 6%).



Following last month's announcement that comparable store sales were unchanged
year-on-year in the 10 weeks to 8 September 2012, growth of 1% was delivered
in the second quarter as a whole, with a modest improvement in all three major
regions at the end of the period.



The key driver of the softer second quarter performance was footfall,
mitigated by higher average transaction values. The penetration of Prorsum and
London increased by six percentage points year-on-year and there were more
full price sales in mainline stores. Soft accessories and mens non-apparel
and tailoring performed strongly, while replenishment remained at around half
of mainline revenue.



For the second quarter, Americas and Europe comparable store sales were
unchanged year-on-year, while Asia Pacific delivered slightly positive
comparable store growth. Compared to the first quarter, Hong Kong, France and
Germany maintained their robust performance, while the UK and China slowed.
Korea and Italy remained weak.



During the first half, Burberry opened 13 mainline stores and closed seven.
Openings were focused in flagship markets including Regent Street, London,
Burberry's largest and most innovative brand environment; Pacific Place, Hong
Kong; Milan and Rome. Average retail selling space increased by 12% in the
first half, biased towards Asia Pacific and Europe.





Wholesale



Wholesale revenue grew by 5% on an underlying basis in the first half (up 2%
at reported FX). This was in line with guidance, with some re-phasing of
deliveries into the first quarter from the second quarter. There was
double-digit growth in the United States and with Emerging Markets franchise
partners, while Europe was broadly unchanged year-on-year, reflecting further
planned rationalisation of the brand's specialty store distribution.



During the first half, five franchise stores were opened, including two with a
new partner in the Baltic region and the first Burberry store in Jordan,
bringing the total to 62.





Licensing



Licensing revenue decreased by 5% on an underlying basis in the first half
(down 3% at reported FX), consistent with full year guidance. Against the
anniversary of the Burberry Body launch last year, global product licences
delivered solid growth in the half, helped by deliveries to distributors ahead
of the launch of The Britain watch in early October. In Japan, apparel
royalty income was broadly unchanged, while non-apparel income was down due to
continuing licence rationalisation.



As announced separately today, in order to capitalise on the significant
opportunities available for the brand in fragrance and beauty, Burberry will
directly operate these product categories with effect from 1 April 2013.
Further information will be provided with the interim results on 7 November
2012.





Outlook



Retail: For the second half of FY 2012/13, average retail selling space is on
plan to increase by about 14%. Openings in flagship markets will include
Chicago, Shanghai and a standalone menswear store in Knightsbridge, London, as
well as further stores in Brazil, Mexico and the Middle East.



Wholesale: For the second half of FY 2012/13, Burberry expects broadly
unchanged underlying wholesale revenue year-on-year (H2 2011/12: £230m),
reflecting the rationalisation of certain opening price point products in core
accessories and outerwear. With a more cautious approach from customers
globally, the United States, Asia Travel Retail and Emerging Markets are
expected to continue to grow, offset by further contraction of small
speciality wholesale accounts, especially in Southern Europe.



Licensing: With timing benefits in the second half, Burberry continues to
expect licensing revenue for FY 2012/13 at constant and reported exchange
rates to be broadly unchanged year-on-year.





Enquiries



Burberry                                         020 3367 3524
Stacey Cartwright EVP, Chief Financial Officer
Jenna Littler     VP, PR and Corporate Relations
Fay Dodds         Director of Investor 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.



Burberry will announce its Interim Results for the six months to 30 September
2012 on 7 November 2012.



Certain statements made in this announcement 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.
Burberry Group plc undertakes no obligation to update these forward-looking
statements and will not publicly release any revisions it may make to these
forward-looking statements that may result from events or circumstances
arising after the date of this document. All persons, wherever located,
should consult any additional disclosures that Burberry Group plc may make in
any regulatory announcements or documents which it publishes. All persons,
wherever located, should take note of these disclosures. This announcement
does not constitute an invitation to underwrite, subscribe for or otherwise
acquire or dispose of any Burberry Group plc shares, in the UK, or in the US,
or under the US Securities Act 1933 or in any other jurisdiction.





Notes to editors



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



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



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



· At 30 September 2012, Burberry globally had 198 retail stores, 215
concessions, 49 outlets and 62 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.



· BURBERRY, the Equestrian Knight Device and the Burberry Check are
trademarks belonging to Burberry which are registered and enforced worldwide.

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

END


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