Retail in Asia


Burberry announces financial results

Fashion house Burberry reported that its first half of FY22 revenues recovered back to FY20 levels at constant exchange rates.

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Despite a continuing challenging external environment, in H1 of FY22, the brand drove a material enhancement in the quality of its revenue streams. Its strategy to exit mainline and digital markdowns and the deliberate tight management of its outlet business resulted in a significant shift towards full-price sales.

The improved quality of Burberry’s revenue streams has enhanced its financial metrics, underpinning exceptional free cash conversion of over 100 percent in the half and an improvement in gross margin of 130bp at CER despite significant pressures from Brexit duties and channel mix. The company has also saw an 11.2 percent point increase in the adjusted operating margin CER vs LY and a 120bps increase against LLY.

H1 FY22 comparable store sales increased +37 percent against the COVID-19 impacted prior year half. Taking H1 FY20 as a base, comparable store sales growth was up 1 percent and was similar over both quarters. We had a strong underlying performance driven by our focus on full-price sales increasing 18 percent in the half with 26 percent in Q1 FY22 and 10 percent in Q2 FY22 vs LLY.

It is reported that in Asia Pacific, H1 FY22 has a 5 percent increase vs LLY.  The growth is seen in Mainland China and South Korea, driven by new and younger customers. Mainland China saw growth around 30 percent in the half vs LLY. Q2 was affected by travel restrictions in August, with July and September comparable store sales growth at similar levels to Q1.  South Korea remained strong throughout the period with H1 comparable store sales up more than 40 percent vs LLY, with acceleration in Q2. South Asia Pacific fell materially, affected by continued COVID-19 related travel restrictions with average store closures of c.14 percent in the half. The region saw a deterioration in Q2 FY22. Japan also fell, impacted by significantly lower tourist arrivals caused by COVID-19 outbreaks, with a state of emergency announced and travel restrictions following the Olympics. 

 EMEIA H1 FY22 has a -31 percent growth vs LLY. EMEIA improved  QoQ in comparable store sales now that most of the stores are fully open. However, trading remains more challenging as compared with LLY due to limited tourist flows with c.50 percent of annual sales typically from tourists and higher in our second quarter prior to COVID-19. Encouragingly, local customers were positive across the major territories with the region seeing a sequential improvement QoQ in trading compared with LLY.

Americas H1 FY22 has +38 percent growth vs LLY. Americas saw a continued strong performance with H1 FY22 full-price sales almost doubling. Q2 FY22 saw a sequential improvement in comparable store sales, helped by a smaller markdown headwind. The region continues to benefit from strong sales to new and younger customers.

Total group digital sales continue to see strong full-price sales growth compared with LLY that almost doubled in the half and up a double-digit percentage vs LY, although total sales have been affected by reduced markdowns. Growth has slowed in the period as revenue transferred to physical stores as lockdowns eased through the half.

In product, full-price sales saw growth against LLY for all major categories in the half and in Q2. Burberry made further progress in its core categories; leather goods and outerwear. In leather, it continued to build performance by strengthening its Women’s handbags pillars, delivering a programme of 70+ pop-ups for Olympia and expanding the Lola family, as well as introducing its new shape, the Rhombi, as part of its SS22 Runway collection. As a result, in H1 FY22, leather delivered double-digit full-price sales growth vs LLY. In outerwear, it has launched a dedicated campaign including a brand film, strong storytelling on key social media platforms, including a Tik Tok takeover, as well as activations across physical and digital channels. It has innovated and elevated its DK fabric, developing a new lightweight Gabardine, and applied it to more casual styles to create a DK down, with details such as special quilting techniques, cashmere linings and leather details.

At the same time, Burberry continued to elevate the customer experience. Its new store concept roll out is progressing well, with 15 stores completed so far, and a total of around 50 new concept stores planned globally by year end FY22. These stores are resonating well with its customers, attracting high-spending clientele. It strengthened the integration between its offline and online channels by launching regional pilots to enhance content sharing tools for our sales associates. It enhanced product discovery on its website by launching an ‘Outerwear Hub’ as part of its outerwear campaign – a section of the website dedicated to the collection. As a result, the brand has seen good traction with full-price performance on our digital channels, almost doubling its sales in H1 vs LLY and DD growth vs LY.

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“We have made strong progress in the half. Full-price sales are growing at a double-digit percentage, driving margin expansion and strong free cash generation. We are seeing an acceleration in performance in countries less impacted by travel restrictions and we remain confident of achieving our medium-term goals. I would like to thank Marco Gobbetti for his vision and leadership of Burberry’s transformation. We are very excited that Jonathan Akeroyd is joining as our new CEO in April to build on the strong foundations to accelerate growth and deliver further value for our shareholders,” said Gerry Murphy, Chairman of the Burberry Group plc.