TIDMBRBY
RNS Number : 6540C
Burberry Group PLC
19 April 2017
19 April 2017
Burberry Group plc
Second Half Trading Update
Highlights for the six months to 31 March 2017
-- Retail revenue GBP1,268m, up 3% underlying (up 19% at reported FX)
- Comparable sales up 3% (Q3 up 3%; Q4 up 2%)
o Strength in Mainland China drove growth in Asia Pacific
o Double-digit growth in EMEIA led by exceptional performance in
the UK
o Decline in the Americas impacted by the challenging
environment
- Accessories outperformed, with mid-teens percentage growth in
leather goods
-- Wholesale revenue GBP327m, down 13% underlying (down 1% at
reported FX), in line with guidance, with over half the decline
coming from a rationalisation of distribution in key markets and
distributor de-stocking in Beauty
-- Licensing revenue GBP12m, down 38% underlying, in line with
guidance, primarily reflecting the planned expiry of the Japanese
licences
-- Total revenue GBP1,607m, down 1% underlying (up 14% at
reported FX), with performance reflecting the implementation of
strategic priorities and actions to improve brand positioning,
notably in the US and in Beauty
-- Announced strategic partnership in Beauty with Coty, subject to regulatory approvals
-- Good operational and strategic progress
- Brand: The February show generated record online reach and
engagement and the number of visitors to Makers House increased 50%
compared with September
- Product focus: Strong commercial reaction to February
collection, fashion outperformed with innovation in outerwear,
including launch of tropical gabardine
- Productive space: Mainline conversion improved globally
- E-commerce leadership: Digital continued to outperform, led by
mobile
- Operational excellence and Inspired people: Simplifying our
structure and processes; on track to deliver planned cost savings
of GBP20m in FY 2017 increasing to at least GBP100m annualised in
FY 2019
-- Completed GBP100m of announced GBP150m share buyback programme
Christopher Bailey, Chief Creative and Executive Officer,
commented:
"In an uncertain environment, we continue to take action to
strengthen the brand and reposition Burberry for growth. The
outperformance of fashion and the strong customer response to new
products underline our renewed creative momentum. I am delighted
that Marco and Julie have now joined the business. While we have
more to do, as we build on our progress so far, we remain confident
about Burberry's prospects in the longer term."
The financial information contained herein is unaudited.
Second half revenue
Performance in all channels reflects ongoing brand
repositioning. Burberry delivered growth in retail, now c.80% of
revenues compared with c.70% three years ago.
Revenue by channel
Six months
to 31 March % change
GBP million 2017 2016 reported underlying
FX
------------------ -------- -------- --------- -----------
Retail 1,268 1,064 19 3
Wholesale 327 330 (1) (13)
-------- -------- --------- -----------
Retail/wholesale 1,595 1,394 14 (1)
-------- -------- --------- -----------
Licensing 12 16 (26) (38)
-------- -------- --------- -----------
Total 1,607 1,410 14 (1)
Retail
Retail, up 3% underlying (up 19% at reported FX), with
comparable sales up 3% (Q3: up 3%; Q4: up 2%).
Comparable sales by region,
-- Low single-digit growth in Asia Pacific
- Mainland China delivered high single-digit percentage growth,
accelerating through the half, but Hong Kong declined, experiencing
negative footfall only partially offset by improved conversion
- Korea, our third largest market in Asia, declined, impacted by
both the macro environment and our own actions to reduce
promotional activity
-- Double-digit percentage growth in EMEIA
- Continued exceptional performance in the UK. Continental
Europe improved through the half, particularly France, while the
Middle East remained challenging
- Growth from both travelling and domestic customers
-- Mid single-digit percentage decline in the Americas
- The relative strength of the US dollar drove a strong increase
in sales from US customers abroad, while demand at home reduced
(both domestic and tourist)
- In addition, strategic actions taken to protect brand
positioning in the highly promotional US environment, contributed
to the decline
Digital growth reflected strategic focus and investment
- With strong traffic and improved conversion, mobile delivered
the majority of the growth, up c.50% year-on-year
- The enhanced local website in China delivered positive results
with a near doubling of direct to consumer sales
By product, newness led growth in all categories with a strong
customer response to the February runway collection and its
commercial extensions, innovation performing in outerwear and
strength in leather goods.
Wholesale
In line with guidance, wholesale revenue was down 13% underlying
(down 1% at reported FX), with over half of the decline from
Beauty.
Reflecting the rationalisation of distribution in key markets
and distributor de-stocking, Beauty revenue declined by about 20%
underlying. Emphasis placed on pillar fragrances, with My Burberry
and Mr Burberry continuing to gain share in key markets.
Excluding Beauty, underlying wholesale revenue declined, in part
reflecting our strategy to elevate the brand with a significant
decline in the Americas, EMEIA also down year-on-year and Asia
Pacific broadly unchanged.
Licensing
Primarily reflecting the planned expiry of the Japanese Burberry
licences, as we moved to direct retail operation, revenue declined
by 38% underlying, consistent with guidance.
Outlook
FY 2017
No change to our expectation for FY 2017 adjusted PBT at FY 2016
rates.
The expected impact of year-on-year exchange rate movements on
reported adjusted retail/wholesale profit at 31 December rates* was
about GBP115m, at the time of the Q3 Trading Update it had become
slightly more favourable towards GBP120m, and at 31 March rates is
about GBP130m.
FY 2018
Retail: Burberry will focus on productivity from the current
store footprint therefore no contribution from net new space is
expected in FY 2018.
Beauty: On 3 April 2017, Burberry announced a strategic
partnership with Coty for its Beauty business from October 2017,
subject to regulatory approvals. The impact is expected to be
broadly neutral to adjusted PBT in FY 2018 and accretive from FY
2019.
From the second half of FY 2018 Beauty will transition from a
wholesale business model to licensing. This is reflected in
guidance below.
Wholesale: Burberry expects total underlying wholesale revenue
in the first half of FY 2018 to be down by a mid single-digit
percentage (H1 2016/17: GBP287m). This reflects some expected
business disruption for Beauty. Excluding this, underlying
wholesale revenue is expected to be broadly unchanged year-on-year
(H1 2016/17: GBP217m).
Licensing: Total underlying licensing revenue for FY 2018 is
expected to be up c.20% year-on-year.
FX: At 31 March spot rates, the expected impact of year-on-year
exchange rate movements on reported adjusted PBT is expected to be
about GBP10m adverse. At the time of the Q3 Trading Update this was
estimated to be a benefit of c.GBP20-30m. The majority of the
adverse foreign exchange movement since January is expected to be
offset by an improvement in underlying performance.
Summary
In what remains a rapidly changing environment, Burberry will
continue to take actions to elevate and strengthen its brand
positioning, maintain tight discipline on costs and execute on its
strategic agenda, including the transition of its Beauty business
to a licence agreement. Our focus is on our brand, our products and
the execution of our five strategic pillars to return Burberry to
growth.
* See Appendix
Enquiries
Investors and analysts
Charlotte 020 3367
Cowley VP Investor Relations 3524
Media
020 3367
Andrew Roberts VP Corporate Relations 3761
020 7404
Caroline Daniel Brunswick 5959
Paul Raeburn
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
corporate website (www.burberryplc.com), with a replay available
later. Burberry will announce its Preliminary Results for the
twelve months to 31 March 2017 on 18 May 2017.
Underlying performance is calculated before adjusting items and
removes the effect of changes in exchange rates, compared to the
prior period. This takes into account both the impact of the
movement in exchange rates on the translation of overseas
subsidiaries' results and also on foreign currency procurement and
sales through the Group's UK supply chain. Comparable sales is the
year-on-year change in sales from stores trading over equivalent
time periods and measured at constant foreign exchange rates. It
also includes online sales. Certain financial data within this
announcement have been rounded.
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. Nothing in
this announcement should be construed as a profit forecast. 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, built around its core iconic outerwear.
-- Burberry designs and sources apparel, accessories and beauty,
selling through a diversified network of retail (including
digital), wholesale and licensing channels worldwide.
-- At 31 March 2017, Burberry globally had 209 retail stores,
200 concessions, 60 outlets and 48 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. ADR symbol OTC:BURBY.
-- BURBERRY, the Equestrian Knight Device and the Burberry Check
are trademarks belonging to Burberry which are registered and
enforced worldwide.
Appendix
Retail/wholesale revenue by destination
Six months
to 31 March % change
GBP million 2017 2016 reported underlying
FX
-------------- -------- -------- --------- -----------
Asia Pacific 659 556 19 1
EMEIA 536 463 16 5
Americas 400 375 7 (10)
1,595 1,394 14 (1)
Retail/wholesale revenue by product division
Six months
to 31 March % change
GBP million 2017 2016 reported underlying
FX
------------- -------- -------- --------- -----------
Accessories 607 509 19 4
Womens 468 413 13 (2)
Mens 353 301 17 2
Childrens 59 50 18 2
Beauty 108 121 (10) (20)
1,595 1,394 14 (1)
Exchange rates
Spot rate Average exchange Average
rates for FY 2017 exchange
rates
GBP1= 31 March 31 March 31 December FY 2016
2017 2017 2016 Actual
Actual Forecast
-------------- ---------- --------- ------------ ----------
Euro 1.17 1.19 1.19 1.36
US Dollar 1.25 1.30 1.30 1.50
Chinese Yuan
Renminbi 8.62 8.73 8.75 9.57
Hong Kong
Dollar 9.74 10.11 10.06 11.67
Korean Won 1,402 1,487 1,504 1,740
This information is provided by RNS
The company news service from the London Stock Exchange
END
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