Burberry eyes Japan

Burberry will take full control of its Japanese operations after licence arrangements with local operator Sanyo Shokai come to an end in June 2015. Chief financial officer Carol Fairweather reckons the shift away from a royalty model in the world’s second-largest luxury consumer market offers “an exciting opportunity”. Burberry has four stores and ten concessions in Japan, and expects to add to that portfolio during 2016 and 2017. But don’t expect its efforts in Japan to be transformational: by 2017, the group only expects to generate about £100m of revenue in the country, with profits of £25m.

The new boss has big ambitions for the perfume-focused beauty business, too, after it was taken in house last year. Burberry wants to become a top-10 beauty brand, even though analysts reckon this would require a five-fold increase in sales. Still, growth is expected to be robust: management reckons beauty-related wholesale revenue will grow by about a quarter this year.

Last year, meanwhile, a robust outcome at the core retail operation, where like-for-like retail sales grew 12 per cent, buoyed the full-year numbers. Wholesale revenues, however, which account for 27 per cent of sales, rose just 2 per cent, excluding beauty, after a tough first half. There are challenges on the horizon, too. Should exchange rates remain at current levels, investors can expect a “material” impact on next year’s profit, management warns. Planned investment worth some £200m is also set to drag on profit margins.

Pending upgrades, analysts at HSBC are currently expecting EPS of 85.1p for the current financial year, up from 75.4p.