UK: Burberry H1 profit up 6% as sales growth slows
- H1 underlying pre-tax profit up 6% to GBP173.4m
- Sales grew 8% to GBP883m
- Retail revenue up 10% to GBP577m
British luxury goods group Burberry today (7 November) booked a 6% rise in first-half profit, despite a slowdown in revenue growth across regions and product divisions.
The group said it made an underlying pre-tax profit of GBP173.4m (US$277m) in the six months to 30 September, up from GBP161.6m in the same period last year.
Reported pre-tax profit, however, fell to GBP112m from GBP159m, which includes a one-off payment of GBP71m to end a fragrance and beauty licence with Interparfums. Burberry will take back control of its beauty division from April next year.
The results come after the company in September issued a profit warning - but last month said comparable sales growth had accelerated in the second quarter, helped by higher quality sales and average spend.
Sales in the first-half grew 8% on an underlying basis to GBP883m (US$1.4bn).
Retail revenue at the group's 198 mainline stores, 215 department store concessions, digital commerce and 49 outlets was up 10% to GBP577m, as comparable store sales grew 3% over the half.
Wholesale revenue - generated from sales to department stores, multi-brand specialty accounts, emerging market franchisees and travel retail - increased 5% on an underlying basis.
The firm said its retail/wholesale adjusted operating margin was up by 60 basis points to 15.5%.
Outerwear remained at the core of Burberry's business, during the first-half, with growth driven by fashion and replenishment styles. Mens was the fastest growing product division (up 12% underlying), accounting for 25% of retail/wholesale revenue.
"In retail/wholesale, which accounts for over 90% of our business, Burberry delivered 7% revenue growth, 11% profit growth and a further improvement in operating margin, all in a challenging external environment," said CEO Angela Ahrendts.
"Integrating fragrance and beauty is a significant brand and business opportunity. One consistent brand expression, leveraged across all categories, will underpin future growth in the Beauty division and our existing core business."
But Jon Copestake, retail analyst at the Economist Intelligence Unit, warned the positive results do not necessarily signal a buoyant outlook.
"Burberry have also pointed to a slowdown in growth, something that many peers in the luxury and consumer goods sector have warned of, especially in Asia.
"Earlier this week L'Oreal described trading conditions in South Korea and Taiwan as "brutal" and both these markets represent strong bases for luxury goods demand.
"The decision last month to bring more products in-house may be a reflection of this with Burberry needing to focus on increasing profitability in other areas as revenue potential stalls in markets such as China."
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