1H16 RESULTS

Burberry reported total 1H16 revenue of £1.41 billion, down 1% from 1H15. Retail revenue was £1.06 billion, flat versus the year-ago period. Wholesale revenue declined by 1%, to £330 million. Comparable sales were down 2%, driven by weak performance in Hong Kong and Macau. Excluding Hong Kong and Macau, comp sales were up 1%, driven by strong performance in Mainland China, South Korea and Japan. Tourist spending has slowed down in Europe, which has also affected comps. Digital sales grew in all regions, reflecting good investment return from mobile channels. A successful Mr. Burberry fragrance advertising campaign helped the company’s sales. Christopher Bailey, Burberry’s CEO and Chief Creative Officer, is confident that the brand is gaining momentum from digital channels and product innovations. A single view of inventory is now available in 75 stores across the US, EMEIA and China and across all 44 online countries. “In an external environment that remains challenging for luxury, we continue to focus on reducing discretionary costs and are making good progress with developing enhanced future productivity and efficiency plans,” Bailey said. “Meanwhile, brand momentum is strong, digital continued to outperform in the half and innovation in new products is resonating well with our customers.”

GUIDANCE

For FY17, the company expects the retail channel to contribute low-single-digit percentage growth to total retail revenue, and it plans 15 mainline store openings. The wholesale channel is projected to decline by 10%, reflecting tight inventory control in the US by customers. Total licensing revenue is projected to fall by £20 million, due to expiring licenses in Japan and the company’s decision to terminate its watch license in December 2017.