Devalued Pound Boosts Burberry Revenues

Burberry Fall 2016 Shoes On The
Burberry RTW fall '16 runway collection.
Giovanni Giannoni/Fairchild.

Powerful tailwinds from the devalued pound boosted first-half revenue at Burberry 5 percent to 1.16 billion pounds, or $1.52 billion, although underlying sales in the six months to Sept. 30 were down 4 percent, due partly to declines in wholesale and licensing.

Sales growth came back to life in the second quarter, with the company notching a 2 percent uptick in comparable sales. In the first quarter, they were down 3 percent.

In the half, retail revenue, which represents the bulk of Burberry’s business, was up 11 percent to 859 million pounds, or $1.13 billion, and 2 percent on an underlying basis.

All dollar figures have been converted at average exchange rates for the periods to which they refer.

Sales in Asia-Pacific and EMEIA (Europe, the Middle East and Africa) were up on a reported basis, and broadly flat on an underlying one, while the Americas region was down on both an underlying and a reported basis.

“In a challenging external environment, we continue to focus on product innovation, retail productivity and digital leadership, against a backdrop of sustained action and investment to deliver long-term out-performance of our brand and business,” said Christopher Bailey, Burberry’s chief creative and chief executive officer. “We remain on track to deliver our financial goals.”

The company said it had witnessed “exceptional brand reach” from its September runway show, its first see-now, buy-now effort, and “strong response” to its straight-to-consumer collection. Burberry pointed to a “strength in bags” and emerging growth categories of dresses and ponchos.

In the first half, most product categories saw a decline in underlying growth, with the exception of men’s, which was flat and children’s wear, which was up 9 percent. At reported rates, all categories, except for beauty, grew in the single digits, while children’s wear was up 21 percent.

On an underlying basis, beauty revenue in the half was down 17 percent, and on a reported one it fell 7 percent. The company said underlying wholesale revenue in the division declined by nearly 20 percent, reflecting “cautious ordering” and “strategic brand control,” including the rationalization of distribution in key markets.

The company said its My Burberry and Mr. Burberry fragrances performed well, with market share gains in key markets.

Looking ahead, Burberry said it expects total wholesale revenue at constant exchange rates in the six months to March 31 to be down by a mid-teens percentage on the same period last year, with the trends similar to those in the first half of the current year. The company said that was partly due to “strategic brand elevation in the U.S. and beauty.”

The pound, which has fallen nearly 20 percent against the dollar since Britain’s vote to quit the European Union, will prove a further boon to the company’s top and bottom lines in the full year.

Using Sept. 30 exchange rates, Burberry said that reported adjusted retail/wholesale profit would benefit by about 105 million pounds, or $128 million. Burberry added that, given the significant movement in exchange rates since Sept. 30, the benefit of using Oct. 12 rates would be at least 20 million pounds, or $24 million, higher than the September estimate.

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