Burberry’s Sales Rise Bolstered by China

Fall/Winter campaign for Burberry

Fall/Winter campaign for Burberry

London—Heading into an annual meeting on Friday, Burberry reported today that its sales were strong especially out of Greater China.

Net retail sales rose 9% to 370 million pounds (about $635 million) in the three months through June, Burberry said today in a statement. Analysts had predicted 354 million pounds.

Despite finding growth through focusing on Asia, e-commerce and its continuing push into beauty products, Burberry said exchange rates remain challenging given the pound’s appreciation against most other major currencies.

20 Million Golden Parachute?

Retail revenue rose to 370 million pounds (about $634.84 million) in the fiscal first quarter ended June 30, up 17% from 339 million pounds in the same quarter a year ago, but the company expects currency deprecations to reduce full-year retail profit by 55 million pounds. Comparable store sales were up 12%, a slight slowdown from 13% in the same period last year.

Burberry also said today that currency effects would reduce full-year licensing revenue by 10 million pounds.

“The health of the business remains strong, but currency headwinds have increased,” said Carol Fairweather, Burberry’s chief financial officer. “As we continue to grow the business globally, the FX impact in fiscal year 2015 will be bigger, too.”

Burberry reported low-single-digit percentage comp store sales growth in Europe, the Middle East and Africa, with a reduction in the number of transactions from Russian tourists as sales to Chinese tourists rose. Comparable-sales growth in the Asia-Pacific region was in double digits, with China and Hong Kong leading the way thanks to a strong yuan pushing up revenue.

Burberry continues to perform well in China, even though the consumption of luxurygoods is slowing down. Recent crackdowns by the government on corruption and ostentatious displays of wealth have made the rich wary of wearing visible branding. As a result, splashy brands like Louis Vuitton have struggled more than discreet ones like Hermès.

“Burberry check is one of the most visibly recognizable forms of brands, and yet China and Hong Kong are still showing strong growth for Burberry.”It’s not only at odds with trends, it’s also at odds with what we’re hearing anecdotally in terms of this sort of visibility factor as well.”

Burberry’s New CEO Christopher Bailey may face investor criticism over this criticism over his initial 20 million pounds pay package.

Bailey took over from Angela Ahrendts in May after her departure for Apple Inc., and some shareholders have raised eyebrows over the rate of his compensation given that he is untested in the role. Burberry has pointed out that much of the package will be performance-based.

 

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