Mixed bag for Burberry

Luxury goods group Burberry today revealed contrasting performances as booming sales in new markets such as China and India offset a softening in UK trading.

The British fashion house, known for its distinctive plaid pattern, said pre-tax profits for the year to March 31 fell to £157m (€230m) from £166m (€243m) a year earlier, as it suffered from costs relating to its takeover of wholesale operations and restructuring plans.

However, chief executive Rose Marie Bravo said the group was enjoying a strong spring season and was benefiting from “outstanding” growth in emerging markets such as the Middle East, Brazil and India.

The results, the firm’s first annual figures since its demerger from retail group GUS last year, saw total revenues increase 3% to £742.9m (€1bn) as both its retail and wholesale divisions enjoyed sales increases.

The company said it enjoyed double-digit retail sales growth in the US, its largest market, as it benefited from new and refurbished stores, but it said underlying revenues in Europe were flat as a result of “soft” sales in the UK and Spain.

It also saw a 6% rise in non-Japan Asia Pacific revenue driven by strong retail performance in Hong Kong and mainland China while sales in emerging markets rose on the back of the opening of nine franchised stores at sites in India, Poland, Turkey, Brazil, Mexico and two each in Saudi Arabia and the United Arab Emirates.

Womenswear revenues, which generates more than a third of the company’s sales, grew 3% after an improved autumn/winter collection, reflecting efforts to increase the “wear-now” component of seasonal collections, Burberry said, while greater emphasis on classic styling also helped menswear revenues improve 4%.

Burberry said profit had been hit by its purchase of Taiwanese distributors and the acquisition of its Spanish womenswear business from department store chain El Corte Ingles while it also invested £50m (€73m) in its Project Atlas restructuring plan which is aiming to reduce costs by £20m (€29.3m) a year by 2008.

Ms Bravo, who is set to be replaced by Angela Ahrendts – executive vice-president of US clothing chain Liz Claiborne – later this year, said: “In a year of transition, the group achieved solid financial results while advancing a number of strategic initiatives aimed at Burberry’s next stage of development.”

The group, which is celebrating its 150th anniversary this year, said it opened 12 new stores during the year, including outlets at Palm Beach Gardens, Florida and San Diego, California.

It added it planned to launch a men’s fragrance called Burberry London in autumn this year after the successful launch of a female fragrance, promoted by British actress Rachel Weisz.

Antoine Colonna, analyst at Merill Lynch, said: “The successful roll-out of stores in recent months and the good progress made in the implementation of Atlas are all good reasons to hold the shares not to mention the smooth and promising transition between Rose-Marie Bravo and Angela Ahrendts.”