You are here:

Chequered performance from Burberry

Created:
17 November 2009
Written by:
John Hughman

Burberry recruited Harry Potter star Emma Watson as the new face of the brand in June and, after these lacklustre results, management must be hoping that some of her magic will start to rub off on its sales.

Advertising

Although the group reported that comparable store sales were up 2 per cent in the half - and had accelerated to 5 per cent in the second quarter - that wasn't enough to stave off a 12 per cent decline in underlying operating profit to £86.3m. In fact, the performance was even worse if the benefit of a gusty foreign exchange tailwind was removed, with overall sales down 5 per cent and operating profit down 19 per cent on a constant currency basis.

A restructuring charge of £4.2m put a further dent in profits, a large chunk of which related to the emergency surgery on its Spanish business - the group slashed over 300 jobs in Spain after underlying sales there collapsed 37 per cent. The recession also took its toll on wholesale revenues, which slumped by 23 per cent on an adjusted basis as customers, in the words of chief executive Angela Ahrendts: "procured cautiously".

However, demand for luxury goods remained strong in Burberry's Asia Pacific business, where underlying revenues climbed 3 per cent to £117m. Burberry noted a particularly strong performance in Korea and an acceleration in the second half in Hong Kong, where it opened new concept stores. Its franchise partners in China opened seven stores in the period and Ms Ahrendts said that the group is targeting 100 stores in the country from the current 44 as part of its plans to add 10 per cent in new space a year.

Meanwhile, the group swung to a net cash position thanks largely to a 40 per cent reduction in inventories. However, Ms Ahrendts said that improvements to its supply chain meant that Burberry's ability to respond to customers was better than ever.

Broker Evolution Securities expects underlying full-year pre-tax profit of £189m and EPS of 30.4p (2009: £175m/30.2p).

BURBERRY (BRBY)

ORD PRICE: 594p MARKET VALUE: £2.58bn
TOUCH: 594-595p 12-MONTH HIGH: 617p LOW: 155p 
DIVIDEND YIELD: 2.0% PE RATIO: na
NET ASSET VALUE: 129p NET CASH: £56m

Half-year to 30 Sep Turnover (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2008 539 97.0 17.3 3.35
2009 572 78.4 13.1 3.50
% change +6 -19 -24 +4

Ex-div: 6 Jan

Payment: 4 Feb

Guide to the terms used in IC results tables.

More analysis of company results


IC VIEW:

HighEnough

To be fair to Burberry, this was a great performance given the challenges that accompany selling luxury goods in the midst of a recession. But the shares have recovered strongly in the last year and now trade on 20 times full-year forecast earnings - that leaves little room for slip-ups. High enough.

Last IC view: Fairly priced, 393p, 20 May 2009.


  • Order reprints
  • Back to top

Login

Login

Forgotten password?

Join Us - For Share Prices, Tips & Data

Free access to financial data, charts, portfolio tools and more - registration is quick, secure and free!

Profit from IC share tips; discover the benefits of IC Advantage and sign up for a free trial.

Register Trial IC Advantage
FREE ANALYSIS EMAIL
  • Get our FREE daily investment email. Informed comment on strategy, shares, funds and derivatives. Direct to your inbox at 3pm every day.
Free daily e-mail