Burberry’s third quarter update
Burberry saw double-digit third-quarter revenue growth outside of the Mainland China, where covid restrictions weighed on results.
For the quarter ended Dec. 31, the British luxury house’s revenue rose 5.0 percent to 756 million pounds ($933.9 million) from 723 million pounds ($893.1 million), while comparable sales were up 1.0 percent on top of the 7.0 percent increase in the year-ago period. On a constant exchange rate basis, quarterly revenue was flat.
Outside of Mainland China, comparable sales were up 11 percent, with EMEIA (Europe, Middle East, India and Africa), Japan, South Korea and South Asia Pacific all showing double-digit growth. Tourists helped push EMEIA sales up 19.0 percent. Sales in Japan rose 28 percent, South Korea was up 10.0 percent and South Asia Pacific increased by 15.0 percent. Sales slipped 1 percent in the Americas and 7.0 percent in Asia Pacific, including Mainland China’s 23.0 percent decline.
Accessories saw double-digit comparable growth in leather goods. Women’s handbag revenue supported revenue growth in the category, as did double-digit comparable sales growth in bags and soft leather goods in men’s accessories. Burberry’s Archive Beige Check cashmere scarf drove 60 percent of sales for the soft accessories category. Women’s ready-to-wear comparable sales rose by a mid-teen percentage, boosted by dresses and knitwear options featured in seasonal campaigns. Outerwear comparable sales grew by a high-single digit outside of Mainland China.
“We remain confident in our ability to reach our medium-term targets, despite the current macro-economic environment,” CEO Jonathan Akeroyd said. “We are focused on executing our plan to realise Burberry’s potential as the modern British luxury brand and we look forward to unveiling Daniel Lee’s debut collection for Burberry on our return to London Fashion Week next month.”
Burberry reaffirmed its near- and medium-term targets as it continues to “target high-single digit revenue growth, with operating leverage ensuring good margin progression,” in spite of the macro environment.
The new store concept should update 65 doors in Fiscal Year 2023. The 15 stores updated in the third quarter now drive higher average unit retail and productivity. The store base that saw the update in the quarter include Pacific Place in Hong Kong S.A.R., China and in the U.S. at North Park Centre in Dallas. Burberry completed 37 for the year-to-date, for 84 updated stores altogether. All stores are due for the upgrade by Fiscal 2026.
Boohoo’s December sales
British e-tailer Boohoo plc’s troubles continued with an 11.0 percent revenue decline for the four months ended Dec. 31 largely stemming from “extended delivery” problems that impacted demand.
Workers for Great Britain’s Royal Mail went on strike last month and made a mess of holiday deliveries. Communication Workers Union’s members have been locked in a long-running dispute with the Royal Mail over pay and working conditions. And while the Royal Mail has offered to raise pay, the union is pushing for higher compensation aligned with the U.K’s 41-year high inflation of 11.1 percent as of October.
On Wednesday, the Office for National Statistics said core CPI data showed that inflation has eased to a still-high 10.5 percent.
Boohoo said the 11.0 percent decline—down 13.0 percent on a constant exchange rate basis—sent total revenue to 637.7 million pounds ($787.8 million) from 714.5 million pounds ($882.6 million) a year ago. The U.K. reported an 11.0 percent decline to 440.8 million pounds ($544.5 million), Rest of Europe was down 8.0 percent to 73.5 million pounds ($90.8 million), the U.S. fell 12.0 percent to 128.9 million pounds ($159.2 million) and Rest of World decreased 9.0 percent to 34.5 million pounds ($42.6 million).
The fashion e-tailer said its gross margin of 49.7 percent should improve as strategic initiatives such as reducing markdowns take hold. Boohoo said inventory levels fell 27 percent year-on-year.
Word surfaced earlier this month that the fashion firm was planning job cuts after H&M, Asos and Gap Inc also cut headcount. A review is said to be underway at its London office and could extend to Manchester headquarters, Drapers reported.
“Looking ahead, whilst the demand outlook is uncertain due to macro-economic factors, cost inflation is expected to begin to moderate in the second half of the year,” CEO John Lyttle said. “The Group has continued to invest in key strategic priorities that will enable future growth, and the progress made gives us confidence that as macro-economic headwinds ease it will be well-positioned to rebound strongly.”
For the year ending Feb. 28, 2023, Boohoo projected a revenue decline of 12.0 percent , with an adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margin of about 3.5 percent.
“With recent positive signs in global supply chains, we expect to see some easing of disruption along with some relief to freight rates,” it said.
Matalan gets new owners Thursday
Key noteholders part of the senior noteholders including Invesco, Man GLG, Napier Park and Tresidor are on track to own Matalan on Jan. 26, 2023.
The recapitalization deal will reduce Matalan’s debt by up to 336 million pounds ($416 million), infuse up to 100 million pounds ($124 million) of new capital for growth, and extend debt maturities to 2027. A flexible new debt package will provide “committed, undrawn funding, additional basket capacity and a range of downside protections” as well as a “stable and sustainable balance sheet” to support store development, logistics and e-commerce, Matalan said.
“Matalan is a fantastic business and I am pleased that with the support of our First Lien Noteholders, its ongoing future has been secured via a materially lower level of debt and a reset balance sheet,” Matalan chief financial officer Stephen Hill said. “It is clear in our third quarter and recent trading performance that whilst the market remains challenging, customers have demonstrated a strong affinity to our brand and proposition, evidenced from our robust and ongoing sales growth.”
Parent holding company Missouri Topco Limited said Matalan reported a 10.3 million pound ($12.7 million) loss on a 7.0 percent gain in revenue to 312.8 million pounds ($386.4 million) for the third quarter ended Nov. 26. That’s compared with profits of 12.2 million pounds ($15.1 million) on revenue of 291.4 million pounds ($360 million) in the same-year ago period.
Under new ownership, Matalan founder John Hargreaves will lose control of the company, his equity stake and 68 million pounds ($83.4 million) in loans he made to the homewares and fashion retailer.