Burberry offsets Hong Kong woe with US growth
BURBERRY yesterday posted a jump in underlying sales in the second half thanks to double-digit growth in Europe and the US, helping to offset a further slowdown in Hong Kong.
The wealthy Asian financial centre is a profitable, high margin market for Burberry and accounts for around 10 per cent of sales, with tourists making up around 80 per cent of shoppers.
However, last year’s pro-democracy protests and the Chinese government crackdown on expensive gifts has deterred Chinese tourists from visiting Hong Kong.
The FTSE 100 luxury brand, said like-for-like sales fell by a “mid-single digit” in Hong Kong as a result fewer visitors to its stores.
However, the Americas and its Europe, Middle East, India and Africa region performed well thanks to particularly strong demand from tourists and locals in France, Italy and the UK.
Group underlying revenue rose nine per cent to £1.4bn in the six months to 31 March, while sales at directly operated stores were up 13 per cent, boosted by shoppers snapped up core heritage trench coats and scarves.
Wholesale revenue decreased by three per cent to £231m, which Burberry blamed on cautious ordering from wholesale customers selling to the European consumer and in Asian travel retail markets.
The euro’s slide against China’s renminbi has prompted several retailers to raise prices in Europe and cut them in China to even out the disparity in prices between different markets.
The trend has encouraged Asian buyers to snap up goods in Europe and resell them at home, a practice often referred to the grey market. Chanel has cut prices by as much as 20 per cent in China.
Burberry finance chief Carol Fairweather signalled it may also take similar action. “We will maintain our price positioning by market relative to our immediate peers,” she said yesterday.
THE ABSENT CHRISTOPHER BAILEY
IT WAS Burberry’s second half trading update yesterday and once again the luxury brand’s creative officer and chief executive Christopher Bailey was conspicuous by his absence. The quiet Yorkshireman did not host the results presentation, leaving the task instead to the group’s admittedly articulate and numerate chief financial officer Carol Fairweather.
This in itself would not be remarkable if it wasn’t for the fact that since Bailey took over from his predecessor Angela Ahrendts in April last year, he has made few public appearances in front of analysts and even fewer in front of the media. One of the rare times last year was at the annual meeting in July when shareholders revolted against Bailey’s pay package – perhaps not the best time to make new acquaintances.
The company says that having many other top spokespeople at hand, including Fairweather and chief operating officer John Smith, allows Bailey to step back.
Investors and analysts alike will have to wait until the group’s prelims on 20 May before being able to grill the great man on strategy.