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Burberry reports robust revenue growth in H1

By Prachi Singh

Nov 11, 2021

Management

Image: Burberry, Facebook

In the first half of FY22, Burberry saw revenues recover back to FY20 levels at constant exchange rates. The group’s total sales increased 45 percent at CER and 38 percent reported to 1,213 million pounds driven by strong mainline and digital full-price sales, which rose 49 percent against last year. Burberry’s adjusted profit before tax rose to 180 million pounds and reported pre-tax profit rose to 191 million pounds.

Comparable store sales against the year before last year were 1 percent ahead with the group seeing similar trends in both Q1 FY22 and Q2 FY22. The company saw double-digit full-price comparable store sales growth in each month during H1 FY22 vs LLY, except for August, caused by the Covid-19 related travel restrictions imposed in the APAC region. This was especially impactful in Mainland China, reducing footfall materially, leading to an adverse effect on revenues.

In total, the company saw 37 percent growth in retail comparable sales compared with last year with 4 percent from space and 69 percent increase in wholesale revenue.

“We have made strong progress in the half. Full-price sales are growing at a double-digit percentage, driving margin expansion and strong free cash generation. We are seeing an acceleration in performance in countries less impacted by travel restrictions and we remain confident of achieving our medium-term goals. We are very excited that Jonathan Akeroyd is joining as our new CEO in April to build on the strong foundations to accelerate growth and deliver further value for our shareholders,” said Gerry Murphy, Chairman of the Burberry Group plc.

Review of Burberry’s first half trading performance

Group adjusted operating profit increased more than fourfold in the half at CER against the Covid-19 impacted prior year, while gross margin increased in the period by 130bps CER and 120bps reported.

Reported operating profit increased 2.4x. H1 FY22 comparable store sales increased 37 percent with 90 percent increase in the first quarter and 6 percent in the second quarter of FY22 against the Covid-19 impacted prior year half.

Taking H1 FY20 as a base, comparable store sales growth was up 1 percent and was similar over both quarters. The company’s full-price sales increased 18 percent in the half with 26 percent in Q1 FY22 and 10 percent in Q2 FY22 vs LLY.

Highlights of Burberry’s results across geographies

Sales in the Asia Pacific region rose 5 percent in the first half with 7 percent increase in the first quarter and 3 percent in the second quarter compared to FY20. Burberry said, Asia Pacific growth saw a good underlying performance in Mainland China and South Korea driven by new and younger customers.

Mainland China saw growth around 30 percent in the half vs 2020. Q2 was affected by travel restrictions in August, with July and September comparable store sales growth at similar levels to Q1. South Korea remained strong throughout the period with H1 comparable store sales up more than 40 percent, with acceleration in Q2

South Asia Pacific, the company added, fell materially, affected by continued Covid-19 related travel restrictions with average store closures of 14 percent in the half. The region saw a deterioration in Q2 FY22.

Japan also fell, impacted by significantly lower tourist arrivals caused by Covid-19 outbreaks, with a state of emergency announced and travel restrictions following the Olympics.

Sales in EMEIA declined 31 percent in the first half with 38 percent drop in the first quarter and 25 percent in the second quarter against H1 2020.

Americas revenues in H1 FY22 were up 38 percent with 34 percent growth in (Q1 FY22 and 42 percent in Q2 GY22. Americas saw a continued strong performance with H1 FY22 full-price sales almost doubling.

Total group digital sales continue to see strong full-price sales growth compared with last to last year that almost doubled in the half and up a double-digit percentage vs last year, although total sales have been affected by reduced markdowns.

Burberry’s outerwear category saw improving momentum in the half with Q2 full-price sales increasing by 12 percent. Within this jackets, downs, coats and quilts grew around 50 percent while rainwear remained more challenging. Leather saw a strong Q1 with the Olympia campaign, with total full-price sales in the half up double-digits.

Menswear performed well in H1 FY22 with full-price sales up 14 percent due to good traction in jersey wear and trousers, with shoes an especially strong performer. Womenswear was more challenging in the half with full-price sales up modestly although it saw a good performance in trousers and knitwear, but challenges in rainwear.

In H1 FY22, Burberry opened 15 stores and closed 11 stores. Key openings included five mainline stores in Mainland China with three in the new format and a new concept store in Sloane Street, London.

Wholesale revenue increased 69 percent at CER in H1 FY22 and increased 3 percent CER against 2020. Licensing revenue increased 13 percent at CER with sales starting to recover.