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Fewer People Need Discounts and Deals to Buy Burberry

Double-digit growth in key markets and a new store concept drove Burberry Group revenue and operating profit expansion for the first half.

In a Nutshell: First-half revenues in Fiscal Year 2022 are back at pre-Covid-19 levels at constant exchange rates, while the Americas, Mainland China and South Korea delivered “strong double-digit growth in the period, Burberry said, noting that other regions suffered from a lack of tourism.

For the half, core product categories included leather, which posted double-digit growth in full-price comparable sales helped by strength in women’s handbags, and outerwear, which strengthened in the period. Full-price sales in outerwear rose 12 percent in the second quarter, with jackets, downs, coats and quilts growing around 50 percent as rainwear stalled. Men’s wear saw full-price sales up 14 percent, helped by good traction in jersey wear and trousers, with shoes a strong performer. Good performance in trousers and knitwear drove a modest lift in full-price women’s wear sales.

Burberry’s new store concept, in operation at 15 locations, is attracting higher-spending customers. Another 50 global stores are planned in the format by the end of the Fiscal Year 2022.

“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,” Gerry Murphy, chairman, said.

Burberry said Fiscal Year 2022 represents the start of the growth and acceleration phase of its transformation strategy. The exit of mainline and digital markdowns and a tight management  of its outlet business resulted in a “significant shift towards full-price sales,” Burberry said, adding that full-price sales almost doubled in the Americas, was nearly 80 percent in South Korea and was up over 40 percent in Mainland China, despite regional lockdowns and extreme weather in August.

During the period, the company also pledged to be Climate Positive by 2040, setting a new industry standard that goes beyond net zero, Burberry said.

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Last month, Burberry named former Versace CEO Jonathan Akeroyd as its new chief executive and executive director, effective April 1, after Marco Gobbetti, widely credited for implementing the brand’s transformation strategy over the past several year, gave notice in June.

Net Sales: Revenue for the first half ended Sept. 25 rose 38 percent to 1.21 billion pounds ($1.62 billion) from 878 million pounds ($1.17 billion).
Wholesale revenue rose 60 percent to 249 million pounds ($332.8 million), while retail sales were up 34 percent to 944 million pounds ($1.26 billion) as retail comparable store sales rose 37 percent. Retail full-price comparable store sales over the same period climbed 18 percent. Licensing revenue rose 10 percent to 20 million pounds ($26.7 million).

Full-price digital sales “almost doubl[ed]” when compared with year-ago figures.

The accessories division gained 44 percent growth to 435 million pounds ($581.5 million). Sales in women’s rose 36 percent to 330 million pounds ($441.1 million), while men’s rose 35 percent to 347 million pounds ($463.9 million). In children’s and other classifications, sales rose 39 percent to 81 million pounds ($108.3 million).

Americas revenue rose 83 percent to 310 million pounds ($414.4 million), followed by Europe, Middle East, India and Africa at up 44 percent to 361 million pounds ($482.6 million). Revenue growth in Asia Pacific rose 19 percent to 522 million pounds ($697.8 million).

Growth in Mainland China and South Korea was driven by new and younger customers. Covid-19 outbreaks and travel restrictions following the Olympics dampened sales in Japan. New and younger customers drove sales in the Americas.

Gross margin rose 120 basis points. “In line with our elevation strategy, gross margin benefited from a higher mix of full-price sales and product elevation driving higher average prices,” Tapestry said.

Earnings: Operating profit for the period more than doubled to 207 million pounds ($276.7 million) from 88 million pounds ($117.6 million) a year ago. Diluted earnings per share for the period was 35.7 pence ($0.48).

Burberry maintained its medium-term guidance for high single-digit top-line growth and meaningful margin accretion.

Chairman’s Take: “We are seeing an acceleration in performance in countries less impacted by travel restrictions and we remain confident of achieving our medium-term goals,” Murphy said.