British luxury house Burberry has reported a rise in retail revenue of 3% in the six months to 31 March; however shares in the business dropped 5% at market opening on the back of the announcement.
Retail revenues hit £1,268m however total revenues were down 1% at £1,607m as the business continues its restructuring and strives to improve brand positioning “notably in beauty and in the US”.
Wholesale revenue was down 13% at £327m as a result of Burberry rationalising its distribution and distributor destocking in the beauty category - earlier this month the brand revealed it had signed a worldwide exclusive licensing agreement with Coty for its beauty and fragrance business after four years of direct ownership. Licensing revenue was down 38% representing a planned expiry of Japanese licenses.
Regionally Burberry reported high single-digit percentage growth in the mainland China market, though Hong Kong was down. And Korea was also down, partly due to the “macro environment” and Burberry’s decision to cut promotional activity in the country. This meant overall performance in APAC was down slightly.
In EMEIA, the UK’s performance was “exceptional” (sterling’s slump post Brexit vote has increased tourist spending) and continental Europe, in particular France, improved during the half-year period. The Middle East, however, “remained challenging”. Overall EMEIA was up by a double-digit percentage.
The Americas were down by a mid single-digit percentage as the relative strength of the dollar drove an increase in business from US customers abroad but a decline in the domestic market. Again, Burberry cut back on promotional activity in this market.
Its digital business continued to grow strongly with circa 50% growth year on year, which was largely driven by mobile.
CEO and chief creative officer Christopher Bailey said: “In an uncertain environment, we continue to take action to strengthen the brand and reposition Burberry for growth. The outperformance of fashion and the strong customer response to new products underline our renewed creative momentum.”
Referencing the recent arrival of new CFO Julie Brown and CEO-in-waiting Marco Gobbetti he added: “I am delighted that Marco and Julie have now joined the business. While we have more to do, as we build on our progress so far, we remain confident about Burberry’s prospects in the longer term.”
Bailey will hand over the CEO responsibilities in July to Gobbetti, who is currently heading up the APAC region having joined from Céline in January. After that point Bailey will assume the role of president and chief creative officer.