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Burberry pre-tax profits rocket 50%

Pre-tax profits at Burberry rocketed nearly 50% to £129m in the six months to September 30, as the luxury giant introduced a new pricing strategy and fine-tuned its stock replenishment system.

Like-for-likes at Burberry jumped 9% in the period, whilst total adjusted revenues grew 21% to £641.1m, thanks to less discounting on its core products, including its trench coats, and 20 new store openings in the Americas and Asia Pacific. Operating margin grew to 14.8% from 10.7% in the same period last year.

Burberry’s retail operation turned over £366m, accounting for 57% of total revenue, whilst its wholesale operation turned over £226m. Sales of clothing grew by 13%, driven by outerwear, while sales of accessories such as large leather goods grew by 26% and now account for 40% of total turnover.

Chief executive Angela Ahrendts flagged the UK, Italy, France and Hong Kong as the key retail performers over the period. She said momentum has been building in Europe recently but admitted that it was “difficult to gauge” whether the growth showed a return of demand in the region or if it had been driven by Chinese tourists.

Burberry saw double digit growth across mens, womens, non-apparel and childrens thanks to high impact monthly presentations, product innovation and increased average product prices. Outerwear, including its standout shearling jackets, and leather bags drove “about half” of the mainline sales growth through improved full-price sell through

Wholesale revenue excluding China, which transferred from wholesale to retail on September 1, was up by 21%. Ahrendts said she was “thrilled” with the brand’s strong performance in US department stores, and the brand is currently developing retail-led strategies with its partners expand this area further. Travel Retail was particularly strong in Asia Pacific.

Digital commerce grew by 50% over the half year due to its investment in digital initiatives, including an interactive advertising campaign for autumn 10 and a livestream of its September catwalk show online, which attracted 650,000 viewers, and to audiences at 25 flagship stores, through its “retail theatre” technology. A global digital commerce platform is currently being tested for roll out in the next few months.

Burberry will invest £130m in the business over the full year with “aggressive” investment plans for its newly acquired Chinese business to improve retail productivity and on new store openings. Meanwhile, it will also increase its focus on menswear, which has been relaunched for spring 11 after non-renewal of licences. Wholesale orders for the season are up by a double digit percentage. Ahrendts said men’s non-apparel products would be another area for future investment.

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