Burberry is to step up investment in new luxury markets, such as Latin America, as it seeks to build on the strength of its brand and a 23 per cent increase in underlying profit in the year to March.
Angela Ahrendts, chief executive, said: “Shame on us if we don’t optimise the momentum of the brand and capitalise on the strong financial performance.”
Burberry will allocate £130m ($187m) to capital expenditure in the coming year, up from £70m last time, including a 50 per cent increase in spending on new stores.
The group plans to open 20 to 30 wholly owned stores this year, with most emphasis on the Americas and Asia-Pacific. It was also likely that 15-20 franchised stores would be opened during the year.
Burberry recently opened its first store in Brasilia and it plans another four stores in Brazil this year.
“That is just the start for that region,” said Stacey Cartwright, finance director. “We see South America as a big push now. We like the region.”
It is opening a flagship store in Sydney and a second Burberry Brit casual outlet in New York. A London Brit store is expected to follow. It also plans to expand in India and in accessories in Japan, while a handful of stores are planned for Europe.
“Some of these openings will take it into new markets … some will be second or third stores [in line with our] cluster strategy, [as well as] new concept stores that we will continue to roll out,” said Ms Ahrendts.
The comments came as Burberry made a pre-tax profit of £166m, after a £45m charge for closing a design facility in Spain, compared with a loss of £16m the year before, on sales that rose 6 per cent to £1.28bn.
Most of the losses last year were attributable to £116m of impairment charges the group took on its Spanish operations. Underlying profit, which excludes exceptional items, rose 23 per cent to £215m. Burberry had net cash of £262m. Earnings per share were 18.4p, compared with losses of 1.4p the previous year; the total dividend is lifted from 12p to 14p via a 10.5p final.
Ms Ahrendts said Burberry felt no pressure to revive its New Bond Street store, which was revamped last year, with the arrival on Friday of Louis Vuitton’s new luxury emporium. “I think it will drive a lot more traffic,” she said. “We don’t overlap a tremendous amount with them.”
Burberry shares rose 46½p to 659p.
The group’s retail division – which operates Burberry-branded stores and concessions as well as the Burberry website – was the only division that saw underlying revenue growth, with sales up 15 per cent to £749m in the year, or 7 per cent in like-for-like terms.
However, there was a split in performance between Burberry’s North American outlets, where same stores sales fell by double-digit percentages; and the European and Asia-Pacific stores, which saw double-digit growth, led by strong performances in Korea and Hong Kong.
The group closed nine stores during the year, and opened 21, eight of which were in Asia-Pacific, including a second children’s wear store in Hong Kong. Burberry will now open between 20 and 30 stores in the coming year, focusing mainly on North America and Asia-Pacific.
Retail accounts for 58 per cent of Burberry sales, and the group has now completed the bifurcation of its main retail offering between a casual wear label under the Burberry Brit brand, and a more formal wear offering that trades under Burberry London.
Within the retail division, non-apparel items were the fastest growing product category, with sales of bags and accessories up 10 per cent.
At the wholesale division – which sells to independent boutiques, franchisees and department stores – revenues dragged, with underlying sales down 15 per cent to £434m. Sales were pulled lower by the closure of the lower-priced Thomas Burberry brand, the continued weakness in Spain, and the ending of certain contracts with smaller European retailers.
source: ft.com
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