Tuesday, the global luxury company Burberry Group (BRBY.L) posted 13% growth in its first half profit but warned that the trading environment had been more difficult since the start of the second half, especially in the United States.
The London, U.K.-based company's six-month attributable profit advanced 13% to GBP 74.8 million from GBP 66.1 million in the prior-year period. On a per share basis, earnings totaled 17.0 pence, an increase of 14%, compared with 14.9 pence earned in the same period of last year.
Profit before taxation for the period edged up 1% to GBP 97.0 million from $95.8 million in the year-ago period.
First-half operating profit was GBP 100.1 million, up 3% from prior year's profit of GBP 97.3 million. Adjusted operating profit rose 3% too GBP 98.4 million from GBP 95.1 million a year-earlier.
Adjusted earnings for the period was 15.3 pence per share, up 3%, compared to 14.8 pence per share posted in the comparable period of the previous year.
Revenue for the six-month ended September 30, amounted to GBP 539.1 million, up 20% on reported basis, from the previous year's revenue of GBP 449.1 million. First-half revenue increased by 13% on an underlying basis with retail sales up 14% and wholesale up 15%.
The company attributed the double-digit revenue growth during the first half to the non-apparel, which accounted for 31% of revenue in the six-month period. Handbags were about 40% of non-apparel sales.
Angela Ahrendts, Chief Executive Officer of Burberry Group, commented, "With our supply chain and IT investments in their final phases, we are now in a position to drive significant efficiencies in the near term. These benefits, along with continued investment in the business, our seasoned management team, strong brand perception and proven strategies underpin our confidence in the future long-term growth of Burberry."
On a segmental basis, by channel of distribution, retail sales, which contributed 45% of total revenue, rose by 14% on an underlying basis or 21% on a reported basis to GBP 245.0 million from GBP 202.5 million last year. Comparable store sales were up by 3%, on top of 11% prior year. Wholesale revenue contributed 47% of total sales. Year-over-year wholesale revenue grew by 23%, or 15% on an underlying basis, to reach GBP 254.4 million.
Sales in Europe, North America, and the emerging markets had the strongest growth in wholesale revenue, with particular strength in China, Russia, the Middle East and Eastern Europe. Total licensing revenue in the first half declined by 3% on an underlying basis.
Revenue growth in Europe was 28% on reported basis, or 19% on underlying basis, amounting to GBP 177.8 million. Americas generated first-half revenue growth of 28%, or 23% on underlying basis, to reach GBP 125.8 million. Revenue in the Asia Pacific region grew 25%, or 23% on an underlying basis.
Burberry's Womenswear revenue ascended by 13% on an underlying basis, and Non-apparel continued to outperform with underlying revenue growth of 20% in the first half.
Further, the company noted that the cost benefits from further improvements in the supply chain, including reduced distribution costs and further procurement leverage, as well as design and product development efficiencies, would deliver savings of GBP 15 million - GBP 20 million for the year to end March 2010.
Besides, Burberry said it is currently reviewing the potential for further consolidation and rationalization across the group to realize significant savings and underpin profitability in 2009/10 and beyond.
Looking ahead, the company said if the initial trends continue full-year adjusted profit before tax would be in the mid to lower half of the current range of market expectations for the financial year.
The interim dividend was maintained at 3.35 pence per share, which would be paid on January 29, 2009 to shareholders on the register at the close of business on January 5, 2009.
Consumer Price Index or CPI advanced 4.5% in the year to October, down from 5.2% in September. The all items retail prices index or RPI rose by 4.2%, down from 5.0% in September, according to the latest data issued by the Office for National Statistics, United Kingdom. Food and non-alcoholic drink contributed 1.1 percentage points to the 12-month rate in CPI. Overall prices rose by 10.1%. In contrast, prices of clothing and footwear fell by 6.7% over the 12 months to October and this had a downward pull of 0.4 percentage points.
Food contributed 1.1 percentage points to the 12-month rate in RPI. Overall prices rose by 10.1%, offset partly by 4.0% fall in clothing and footwear prices over the year. The largest offsetting effect came from a 17.7% fall in audio-visual equipment.
On November 13th, Switzerland's Richemont (RIT.L), world's largest jewelry maker, posted a higher profit in first-half, bolstered by strong sales growth and continuing cost control. Profit before taxation for the first half rose to EUR 654 million from EUR 598 million in the comparable period last year. Net profit, including the results of British American Tobacco, increased 5% to EUR 864 million from EUR 824 million last year. Sales for the period increased by 10% to EUR 2.8 billion from EUR 2.5 billion, reflecting the growth in Europe and Asia-Pacific regions. On a constant currency basis, sales showed 16% growth.
In a separate communiqué, Burberry said it has formed a joint venture with its franchisee, The Jashanmal Group, creating a new company, Burberry Middle East LLC, headquartered in Dubai. Burberry Middle East would manage all Burberry retail and wholesale distribution within the United Arab Emirates markets including Dubai and Abu Dhabi, as well as Qatar, Oman and Kuwait under a fifteen-year agreement.
The company stated that the joint venture would enable Burberry and Jashanmal to capitalize more quickly on opportunities in parts of the Middle East while increasing investment in this region. Year-to-date comparable store sales in these countries have increased by over 40%, demonstrating the growth potential of the market.
BRBY.L, which has been trading in the range of 198p - 595p for the past 52 weeks, is currently down 22.75p or 11.36% trading at 177.50 pence on a volume of 2.66 million shares.
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