London–Burberry Group has posted a 27% increase in third quarter sales, and predicted today its full-year profit would be ahead of expectations.
Revenue in the fiscal third quarter ended Dec. 31 increased to 480 million pounds (about $768 million) from 380 million pounds a year earlier exceeding analysts average estimate for for sales of 437.7 million pounds.
Burberry now forecasts full-year adjusted pretax profit of 250 million pounds to 290 million pounds and predicts that the figure will be near the top end of the estimate, Stacey Cartwright, chief financial officer, said on a conference call to analysts. The previous prediction was for profit on that basis of 240 million pounds to 270 million pounds.
Migration toward a Retail Model
Burberry saw its retail sales increase 36% on an underlying basis, ahead of an overall 27% revenue rise for the company as a whole. Wholesales revenues rose 15%. The company’s only blip was licensing revenue in the third quarter, which decreased by 7% on an underlying basis. However, this slump was anticipated and in line with Burberry’s migration toward a retail model.
Angela Ahrendts, ceo, said: “The Burberry team delivered a 30% increase in revenue in the third quarter, with strong, consistent growth in both retail and wholesale and in every product division and region. As a result, we now expect adjusted profit before tax for the current financial year to be at the top end of market expectations.”
China Comp Store Sales Rise 30%
The company said that seven mainline stores were opened during the period, including in São Paulo, Brazil and Puebla, Mexico. New space generated 8% of Burberry’s retail growth in quarter, while China, which transferred from wholesale to retail on Sept. 1, 2010, contributed a further 14%. Burberry said that same-store sales grew over 30% in the stores it has acquired in China. Revenue in the Americas climbed 24%. Excluding Spain, European sales increased 13%, with “particular strength” in the United Kingdom and France, the company said.
As has been the case with many recent luxurygoods quarterly reports, the health of Burberry’s retail operations and success in China stand out. Progress in these two areas is part and parcel of Burberry’s intended growth strategy, with plans to “accelerate retail-led growth” and “invest in under-penetrated markets.” This included a flagship store in Beijing, Burberry said, showcasing its most advanced digital in-store technology.
Burberry’s wholesale revenue including China increased by 15%, with strong consumer demand leading to higher in-season orders. Cartwright added, “What’s particularly pleasing is the consistency of our growth across retail and wholesale, in all four product divisions and all three major regions. This to us demonstrates the strong response by consumers to our product, marketing and consumer services and all facilitated by the investment we’ve made in our infrastructure, be it supply chain, planning or dynamic approach to replenishment.”
Burberry has placed “operational excellence” as another pillar in its business strategy, and in keeping with this the company announced in February 2010 it was to restructure its Spanish operations. Raw materials and tough comparables are also going to make life tougher going forward, the company said.