Burberry revenues soar 17 percent in FY14

REPORT_ Burberry reported a strong financial performance for FY 2014. Retail, wholesale and digital initiatives delivered a 17 percent increase in revenue to 2,330 million pounds (Rs 23,081.1 crores), with adjusted profit before tax up 8 percent and reported profit before tax up 27 percent.

Retail/wholesale revenue up 19 percent and adjusted operating profit went up 17 percent.

Christopher Bailey was appointed Chief Creative and Chief Executive Officer on May 1, 2014. The focus of the executive team

will remain on executing the five strategic themes that have delivered Burberry’s growth to date, while constantly evolving and refining priorities to capitalise on the opportunities available ahead. These include Japan, beauty, digital commerce and better serving the travelling luxury customer globally, while driving operating efficiencies and productivity gains, with the aim of delivering sustainable long-term growth.

As Burberry gave more detail about its strategies for future growth, Christopher Bailey, Chief Creative and Chief Executive Officer, said, “Burberry delivered record sales and profit in 2013/14. The strength of this performance reflects sustained strategic focus, continued investment, disciplined execution and outstanding brand momentum during the year.”

Retail comparable sales growth, a key measure of brand strength, was 12 percent. Burberry began directly operating beauty from April 1, 2013. Looking forward, Burberry is targeting mid-teens percentage growth from fragrance from FY 2016. Accessories revenue was up 12 percent underlying contributing 36 percent of the retail/wholesale total, with double-digit percentage revenue growth in mainline retail across all product categories (large and small leather goods, soft goods and shoes). Men’s accessories grew by over 20 percent in FY 2014, now representing just over 20 percent of mainline retail accessories revenue.

Retail sales grew by 15 percent in FY 2014, contributing 70 percent of total revenue. For FY 2015, Burberry plans to open about 20-25 mainline stores and close between 15-20. Openings are expected mainly in flagship markets and travel retail, while further evolving the store portfolio in China and the Middle East in particular. During the year, Burberry opened 18 stores and concessions in mainland China and closed nine, giving a total of 78 at year-end. In FY 2015, Burberry plans to open 5-10 stores and concessions and close around 15 older, smaller stores, while investing to improve its digital fulfilment and payment capabilities.

Burberry continued to build its presence in other under-penetrated markets. Investment in direct operations in high potential countries included Brazil, which remained a challenging market. Burberry also took direct control in Thailand and Mexico, while working with partners to open franchise stores in markets as diverse as Chile, Colombia, Barbados, Indonesia, Lithuania and Egypt.

With retail accounting for about 85 percent of revenue in the region, comparable sales growth in Asia Pacific was double-digit percentage throughout the year, led by Greater China, especially Hong Kong, following significant investment in real estate made in this flagship market. Mainland China delivered 11 percent comparable sales growth, management actions drove an improvement in Korea, while the small retail operation in Japan selling the global collection delivered strong revenue growth. A net six stores and concessions were opened during the year, evolving the store portfolio in China, Korea and Hong Kong in particular.

Europe, Middle East, India and Africa (EMEIA) region, which was formed on 1 April 2013 from the integration of Burberry operations in Europe and rest of world, retail accounted for about 65 percent of revenue. For the year, performance was robust in the UK, France and Spain, but weaker in Italy and the United Arab Emirates. A net four stores and concessions were added during the year (15 openings, 11 closures) reflecting relocations in markets including Germany and Saudi Arabia, two more stores in India (bringing the total to nine) and the first Burberry Beauty Box in Covent Garden, London.

About 60 percent of Americas revenue came from retail, with high single-digit comparable sales growth during the year. The number of mainline stores in the Americas was unchanged year-on-year at 78, with three closures of small stores in the United States balanced by one additional store in Brazil (bringing the total to eight) and two openings in Mexico (bringing the total to four).

In FY 2015, net new space is expected to contribute low to mid-single-digit percentage growth to total retail revenue. Burberry plans to open about 20-25 mainline stores and close between 15-20, with openings biased to flagship markets and travel retail, while further evolving the store portfolio in China and the Middle East in particular. Excluding beauty, Burberry expects wholesale revenue at constant exchange rates to be broadly unchanged in the six months to 30 September 2014. For Beauty, the fifth product division, wholesale revenue is expected to grow by about 25 percent at constant exchange rates in FY 2015.

As an indication, rebasing FY 2014 retail/wholesale profit for current exchange rates would reduce reported profit by about 40 million pounds (Rs 395.9 crores) and adjusted operating margin from 17.5 percent to around 16.3 percent. At current exchange rates, reported licensing revenue in FY 2015 will be reduced by about 10 million pounds (Rs 98.7 crores) given the movement in the sterling/yen rate.