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LONDON (Alliance News) - Burberry Group PLC Wednesday reported a higher pretax profit and revenues for its last financial year, as outerwear, large leather goods and menswear and demand in Asia continue to drive the business forward.
The FTSE 100 luxury retailer also said it has appointed easyJet PLC Chief Executive Carolyn McCall to its board as a non-executive director.
Burberry said that in the year ahead it will up investment, pumping around GBP200 million in capital expenditure focusing on its retail division, the Japanese market, and its beauty division, which the company brought back in-house last year.
"Japan is the last remaining market for us to align. It is the world's second largest luxury market globally, after the US, and it is growing once again," Chief Financial Officer Carol Fairweather told journalists on a conference call early Wednesday.
The demand for Burberry's goods has been driven by much of the same factors of late; travelling "luxury customers", particularly from Asia, buying the retailer's outerwear and leather goods, like its iconic trenchcoats and check-print patterned goods.
Burberry recorded a pretax profit of GBP444.4 million for the financial year ended March 31, up from GBP350.7 million the prior year, driven by a 17% increase in revenues to GBP2.33 billion, led by its retail division as it invests in its footprint in flagship markets like China, and in digital. During the year the group booked GBP16.1 million in exceptional costs, following the termination of its existing licence relationship with Interparfums SA, when it bought its Beauty division back in-house.
Retail sales grew by 15% in the year, and made up 70% of group revenue. Burberry said the sales increased was driven by improving store productivity and strong digital commerce. It said in-store, footfall remained weak but conversion and average selling price increased again.
Adjusted pretax profit, a closely watch measure by analysts, which strips out exceptional items, was in line with market expectations at GBP460.3 million, up 8% from GBP428.1 million a year earlier.
Burberry has been strengthening its online business, and increasing conversion both online and offline, transforming the company into a digital luxury brand. Former Chief Executive Angela Ahrendts, who was widely acknowledged for driving the firm's embrace of social and new media, has since departed for a senior role at Apple Inc.
Burberry said it closed the year with net cash of GBP403 million, up GBP106 million from a year earlier. It proposed a 10% increase in its full year dividend to 32.0 pence, returning around GBP130 million to shareholders in the year.
The retailer kept much of its outlook for the year ahead the same, reiterating that if the current sterling strength persists, it will have a material impact on its reported retail and wholesale profits for the year. It said that based on current exchange rates in the recent financial year, sterling strength would wipe around GBP40 million off its retail and wholesale profit, and GBP10 million off its licensing revenue.
Looking to the year ahead, Burberry said it will continue to invest in new stores, its online proposition, and its beauty business. Burberry said it is targeting mid-teens percentage growth from fragrance from the financial year 2016, driven by its Brit fragrance.
"In Beauty, we will continue to build awareness of our make-up offer. With skincare, we will continue to explore opportunities, and are looking to launch in late 2015," Fairweather said.
A main focus area in the year ahead are plans to build a growing and profitable business in Japan, a huge market player for the retailer, as the company's Japan wholesale licences expire at the end of June next year.
Burberry currently has four stores and 10 concessions in Japan selling the global collection, which, combined with a small wholesale business, generated revenue of about GBP25 million and was breakeven in the financial year just ended.
"Building on this base, Burberry plans to add free-standing stores and department store concessions, while leveraging owned digital platforms and those of third parties," the company said.
Burberry said it plans to spend around GBP200 million in capital expenditure in the year ahead, of which three quarters will be invested on retail. Last year the group spent GBP154 million in capital expenditure, lower than its guidance, reflecting both the phasing of new projects and timing on payments of existing projects.
It said it plans to open about 20 to 25 mainline stores, and close between 15 to 20, with openings centred around its flagship markets and travel retailing, as well as in China and the Middle East.
In the financial year just ended, Burberry opened 25 mainline stores and closed 17. The store openings were weighted towards "high potential markets" including China, the Middle East, Mexico, Brazil and India, it said.
Burberry shares were up 1.1% at 1,531.90 pence in early trading Wednesday.
By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty
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