THE chief executive of Burberry says the luxury goods group will continue to invest in its operations in Yorkshire where it produces its iconic heritage trenchcoat.
Angela Ahrendts was speaking to the Yorkshire Post yesterday as Burberry announced better-than-expected half-year figures against a backdrop of a “challenging external environment”.
The group – known for its red, black and camel check – posted a 6 per cent year-on-year increase in underlying pre-tax profits to £173m, thanks to high-spending luxury consumers offsetting a drop in footfall across its stores.
Total revenues grew 8 per cent on an underlying basis to £883m for the six months to September 30, 2012.
Burberry recently spooked investors after warning over profits in September amid concerns that China’s demand for its luxury goods was in decline. The group confirmed that like-for-like sales growth slowed in China over the second quarter, but remained positive, giving it “mid-teens” growth over the six months.
However, Burberry’s decision to start making its own perfumes and cosmetics hit profits on a non-adjusted basis. Bottom-line figures fell from £158.7m to £111.9m in the first half as it paid £74m as part of a previously announced £145m charge to end a licence agreement with Interparfums.
Ms Ahrendts said the decision to bring perfumes and beauty in-house was a “significant brand and business opportunity” and will boost profits over time. It is creating a new division for perfumes and cosmetics, called Burberry Beauty.
The group said its outwear, which includes its heritage trenchcoats made in Yorkshire, “remained at the core of Burberry’s business”, “with good growth in the half”.
Burberry makes the trenchcoats at a red-brick factory in Castleford employing 600 people. The group also has a factory at Keighley, where it prints and weaves many of its fabrics. Ms Ahrendts said that as long as the global luxury sector remains robust, headcount across Burberry’s Yorkshire operations would continue to increase.
Burberry has been investing in its Yorkshire facilities for the last couple of years as it has increased production of its trenchcoat. The capacity at its Castleford operation has doubled over the last two financial years, the firm said. “We love, love our iconic heritage trenchcoat, saying Made in England all over the world, so it was the main reason we eliminated an opening price point fabric that was not produced here but was heavily in the assortments in the United States; it’s one of the reasons we opted to eliminate that range and increase the production of the Made in England trenchcoats that we make in Yorkshire.
“We are staying the course, it’s what we’ve been doing the last couple of years, and we see nothing but our investment there to continue to increase,” said Ms Ahrents.
Burberry said that key marketing and retail initiatives globally continued to centre on the iconic trench in the half year, from outdoor advertising in London linked to Art of the Trench, a website encouraging people from around the world to post images of themselves or friends wearing the Burberry trenchcoat, to the introduction of the ‘Burberry Bespoke’ experiences in Regent Street, London, and Chicago, offering a bespoke tailoring service for menswear.
Kate Calvert, retail analyst at Seymour Pierce, said: “This is a reassuring set of results and will help rebuild sentiment towards the shares after its unscheduled trading update in September.” But she said the group’s performance over the all-important Christmas season would be key for its full-year performance.
Burberry lost 20 per cent of its stock market value in one day after September’s profit alert, but more reassuring details on its underlying performance since then has helped shares recover.
Sales figures, which were already announced last month, showed underlying retail sales rising by 10 per cent to £577m in the first half as higher quality sales, such as its Prorsum range, offset a drop in customer numbers.
It said the UK, which accounts for 40 per cent of European retail sales, saw a slowdown in London during the second quarter amid disruption from the Olympics.
Burberry’s interim dividend was up 14 per cent to 8p, from 7p a year earlier, while the group recorded net cash of £237m at September 30, up from £174m in 2011.
Shares in Burberry closed down 53p at 1,199.00p last night.
Extending its reach
BURBERRY’S second-half store openings include Chicago, Shanghai, Brazil, Mexico and the Middle East, while a standalone menswear store opened in Knightsbridge, London, last month.
It said its store opening programme “remains robust”. “Despite the slowdown in traffic during the first half, we are staying in our lane, continuing to invest in flagship and emerging markets and high potential product categories,” said Angela Ahrendts, CEO.
She said she is “thrilled” with the early performance of Burberry World Live, which opened on London’s Regent Street in the first half. The store “blurs the lines between physical and digital”, she said.