Burberry Second-Half Sales Rise 13% on Online Growth

Burberry Group Plc, the U.K.’s largest luxury-goods maker, reported second-half revenue in line with estimates as online expansion boosted growth.

Retail revenue rose 13 percent at constant exchange rates to 928 million pounds ($1.6 billion) in the six months ended March 31, London-based Burberry said today in a statement. Analysts predicted 931 million pounds, according to the median of 13 estimates. Sales at stores open at least a year rose 12 percent, compared with a first-half gain of 13 percent.

Burberry is spending more on initiatives such as click-and-collect to boost sales through digital channels amid slack traffic in stores. Domestic demand is growing again in Europe, LVMH Moet Hennessy Louis Vuitton SA said last week as it reported its fastest quarterly fashion and leather goods sales in two years. Burberry said today that online sales grew, and male shoppers splashed out on accessories as women snapped up the latest designs from its Prorsum line.

Burberry’s results today “confirm the brand’s superior revenue growth profile in a context of subdued luxury demand patterns since the second half of 2013 and few signs of improvement this year,” Thomas Chauvet, an analyst at Citigroup Inc. in London, said in a note.

Burberry’s shares rose 0.3 percent to 1,426 pence at 9:15 a.m. in London trading, valuing the trenchcoat maker at 6.3 billion pounds.

Exchange Rates

The company said today that it anticipates a “material adverse impact on reported profit” at current exchange rates in fiscal 2015. Burberry had warned in January that exchange rates would weigh on results in the fiscal second half and beyond. Italian rival Prada SpA this month forecast slowing same-store sales growth in the financial year through January 2015, citing a strong euro and weakening demand in China.

“Sterling has appreciated quite significantly against some of our major currencies,” Chief Financial Officer Carol Fairweather said today on a call with journalists. “However, this in no way reduces our confidence in the underlying business.”

Burberry said in January it was targeting a modest increase in full-year retail and wholesale operating margin. Today’s statement didn’t repeat that. Fairweather declined to comment on profitability on today’s call, focusing on sales, saying that “there’s nothing in the statement that’s new news.”

Store Openings

Burberry forecast new space in fiscal 2015 will contribute “low to mid single-digit percentage growth to total retail revenue,” and the company expects to open about 20 to 25 stores, and shut 15 to 20, as it focuses on its main markets and travel retail in regions including China and the Middle East.

The company predicted beauty wholesale revenue will grow about 25 percent at constant exchange rates in fiscal year 2015. Burberry is “delighted with” the performance of its new standalone beauty store in London’s Covent Garden, and may open similar outlets elsewhere, Fairweather said.

Christopher Bailey will replace Angela Ahrendts as chief executive officer next month, while retaining the role of chief creative officer. Ahrendts is leaving to run retail operations at Apple Inc. Bailey’s transition is well under way, said Fairweather.

“We are pleased with our second-half performance,” Chief Executive Officer Angela Ahrendts said in the statement. “While current exchange rates are a material headwind in what remains an uncertain macro environment, our continued global brand momentum provides an excellent foundation for the future.”

Before it's here, it's on the Bloomberg Terminal.