Burberry profits up 14% as Chinese sales surge
Luxury fashion label Burberry has today reported a 14 per cent rise in adjusted pre-tax profit to £428 million as strong sales in its Chinese operations drove growth.
Total revenue saw an eight per cent uplift to £2 billion for the year ended March 31st 2013, though the group was detrimentally impacted by costs relating to the strategic ending of its fragrance and beauty licensing agreement.
Retail revenue jumped 12 per cent over the year while LFLs rose five per cent as retail now accounts for 71 per cent of total revenue, up three per cent on 2012.
Average retail selling space jumped by 13 per cent though the group conceded that “retail trading was uneven” during the year.
Nearly 90 per cent of Asia Pacific sales came from retail as China and Hong Kong both saw double-digit growth over the year and its Chinese division accounted for 14 per cent of total sales.
Upgrading its Chinese and flagship markets store portfolio is a key focus for the label as the Chinese appetite for all things luxury remains strong and a net seven stores were opened in the region, including two in Hong Kong.
In Europe, total sales increased six per cent as LFL store sales were “broadly unchanged” for the majority of the year after a strong start to the first quarter.
New European store openings were mainly in flagship markets such as London, Milan and Rome, taking the total to 23 mainline stores opened during the year.
Applauding “an exceptional year for Burberry”, Anusha Couttigane, Fashion Consultant at analyst firm Conlumino, said: “These results are undoubtedly due to considerable space expansion over the year: the company opened no fewer than 45 new locations, 23 of them mainline stores.
“This was underpinned by extended formats in the London flagships at Regent Street and Knightsbridge, demonstrating an enduring commitment to the home market.
“And, despite plans to close up to 25 branches across the board in 2014, another 35 openings are expected, of which eight are planned for China, including three flagship stores in Shanghai.
“The company has also focussed on building its online presence.
“In the UK, this has been reinforced by its sustained Acoustic campaign, which highlights Burberry’s increasing interaction with the emergent music scene.
“Burberry’s apparent disparate approaches in the UK and Asia in fact denote very careful consideration of the cultural tides in each of its markets.”
However, profits over the first half of the new year are expected to be lower than last year, the group warned, after issuing a shock profit warning last September amid disappointing sales.
Wholesale sales dipped one per cent over the year as the label reduced this arm of the business in favour of a focus on its retail operations, rationalising its wholesale accounts, particularly in Europe.
Excluding Beauty, Burberry expects a 10 per cent decrease in underlying wholesale sales in the six months to September 30th 2013, despite increasing its net franchise stores by eight over its current full year.
Nonetheless, Burberry CEO Angela Ahrendts, commented: “Finishing the year with a strong retail performance both online and offline, Burberry achieved record revenue and profit in 2012/13.
“Looking ahead, although the macro environment remains uncertain, Burberry is well positioned with opportunity by channel, region and product.
“With the integration of Beauty in April, we have added another exciting growth platform.
“Our brand momentum, proven strategies and closely connected global team provide confidence in Burberry’s future performance.”