Burberry annual sales drop, profit down 21 percent
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For the year ended March 31, 2017, total revenue at Burberry of 2.8 billion pounds (3.6 billion dollars), was down 2 percent underlying but up 10 percent at reported FX. Adjusted profit before tax of 462 million pounds (598 million dollars), declined 21 percent underlying but rose 10 percent at reported FX. Adjusted diluted EPS increased 11 percent to 77.4p, while reported diluted EPS was down 6 percent. The company said, full year dividend per share rose 5 percent to 38.9p, in line with progressive dividend policy.
Commenting on the full year trading, Christopher Bailey, Burberry’s Chief Creative and CEO, said in a press release, “2017 was a year of transition for Burberry in a fast changing luxury market. Marco Gobbetti assumes the role of CEO from July. With his extensive experience in the sector, we will build on these foundations to elevate and strengthen the brand further and take Burberry to the next level as a global luxury retail and digital business. I am excited to work closely with him in this next chapter.”
Retail sales increased 3 percent
Retail contributing 77 percent of revenue; with 209 mainline stores, 200 concessions within department stores, digital commerce and 60 outlets saw sales rise of 3 percent underlying to 2,127.2 million pounds (2,754 million dollars). The company’s comparable sales increased 1 percent. Burberry said, new space contributed the balance of growth.
With retail accounting for almost 90 percent of revenue in the region, Asia Pacific saw broadly unchanged comparable sales with an improved performance in the second half. Mainland China delivered high single-digit percentage growth, accelerating through the year to deliver double-digit percentage growth in the fourth quarter. Hong Kong improved through the period although remained negative for the full year, impacted by lower footfall partially offset by improved conversion. Korea, the company said, was impacted by both the macro environment and its own actions to reduce promotional activity.
In EMEIA region, retail accounted for 70 percent of regional revenue. Comparable sales increased by a high single-digit percentage, with an improvement to double-digit percentage growth in the second half. Both local customers and tourists contributed to the positive trends with the United Kingdom delivering an exceptional performance and continental Europe seeing improvements in most markets through the year, particularly France. The Middle East remained difficult, experiencing negative footfall trends.
With retail accounting for 70 percent of regional revenue in a Americas, comparable sales reduced by a low single-digit percentage. 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).
Wholesale revenues declined 14 percent
Wholesale contributing 22 percent of revenue; generated from sales of apparel and accessories to department stores, multi-brand accounts, 48 franchise stores and travel retail; as well as beauty to distributors were down 14 percent underlying to 613.9 million pounds (795 million dollars), with almost half of the decline from Beauty.
Beauty revenue declined by about 20 percent underlying. The company said, excluding Beauty, underlying wholesale revenue declined, led by a significant decline in the Americas in part reflecting the company’s strategy to reposition the brand in the US.
Licensing contributing 1 percent of revenue; of which around half is from Japan, with the balance mainly from global product licences saw sales decline 48 percent underlying to 25 million pounds (32 million dollars), primarily due to planned expiry of the Japanese Burberry licence.
Financial highlights of the year
Adjusted operating profit decreased by 21 percent underlying, in part reflecting actions taken in Beauty, wholesale and licensing. Adjusted retail/wholesale operating profit decreased by 19 percent underlying, up 15 percent at reported FX, including a 128 million pounds (165 million dollars) positive impact from exchange rate movements.
Adjusted licensing profit was down 41 percent at reported FX, including a 3million pounds (3.8 million dollars) exchange rate benefit, primarily reflecting the planned expiry of the Japanese Burberry licence.
Burberry expects wholesale sales to decline in FY18
Under its retail division, Burberry will focus on productivity from the current store footprint therefore no material contribution from net new space is expected in FY 2018.
Burberry expects total underlying wholesale revenue in the first half of FY 2018 to be down by a mid single-digit percentage reflecting the potential business disruption for Beauty. Excluding Beauty, underlying wholesale revenue in H1 2018 is expected to be broadly unchanged year-on-year compared to 217 million pounds reported in the first half of last year. Total underlying licensing revenue is expected to be up 20 percent year-on-year.
SummaryPicture:Burberry website