London—While reporting today an annual profit increase on a 24% growth in sales, Burberry Group Plc said it plans to invest in larger format, flagship types stores in key markets.
The British luxurygoods house said its adjusted pretax profit for the year ended March 31 was 376 million pounds (about $594 million), up 26% from 297.9 million a year ago and in line with analysts’ expectations.
This year, Burberry plans to invest some 200 million pounds (about $316 million) in building larger stores, including London’s Regent Street and a rebuild in Chicago. That would increase the brand’s retail selling space 12% to 14% adding about 15 new larger stores in emerging markets and major global cities.
According to Angela Ahrendts, ceo, major global cities account for the largest share of luxurygoods sales and that the brand gets a disproportionate amount of profits from those flagship cities.
“We do feel that we’re underpenetrated in those markets versus our peers which is why we’re focusing there but we also feel that those flagship markets are somewhat sheltered from the overall global economic environment,” Ahrendts said in a conference call.
Burberry has long maintained that tourist sales accounted for much of the growth in major markets, but the company downplayed that Chinese tourists accounted for most of those sales.
“We have the Russians, the Middle Easterns, Indians, South Americans from Brazil travelling in all of the big flagship markets in the world, it’s not just about Asia or China in particular,” said Stacey Cartwright, chief financial officer.
Burberry’s annual net sales were up 24% to 1.86 billion euros, including 15% increase in Europe and the Americas and a 43% increase in Asia Pacific. Comparable store sales increased 14%.
Also Planning More Shop Concepts in U.S. Department Stores
Wholesale revenue rose 9% at 478.3 million pounds. Wholesale growth are partial affected by the conversion from wholesale to retail of China operations, five Saudi Arabia stores and Spanish menswear.
The company reported that all product categories posted double-digit increases with “non apparel” accounting for the largest division at 39% of retail/wholesale revenue. Burberry’s core outerwear and large leathergoods business accounted for half of revenue.
The Americas accounted for 8% of wholesale/retail volume with Burberry noting that it is in the investment phase: “opening up more brand-enhancing, dedicated shop-in-shops in key U.S. department stores.”
Looking forward, Burberry said that investment in new retail would lead “to lower year-over-year retail/wholesale operating margin in the six months ending September, but would improve modestly for the full year.
Burberry wholesale revenue is expected to increase by mid single-digit percentage by September. “Double-digit percentage growth is again expected in key U.S. department store doors, emerging markets franchise partners and Asia travel retail.”