Having reiterated an existing buy call on Burberry (BRBY) last month, these half-year results were unlikely to contain any new information, and even less likely to demonstrate any tangible benefits from the March appointment of the group’s new design boss Riccardo Tisci. Although there were no surprises in the numbers, we may have underestimated the impact of his arrival. Bosses say there’s been an “exceptional response” to Mr Tisci’s “new creative vision”, driven by dedicated efforts to improve brand awareness via social media partnerships with so-called ‘influencers’ on platforms such as Instagram and WeChat.
A digital-first focus is nothing new for Burberry – it was arguably a pioneer in the luxury retail sector in this respect – but, interestingly, the results are most prominent on the wholesale side of the business. Excluding the beauty range (which is transitioning to a licensing arrangement), revenues rose 10 per cent at constant currencies. Work continues to improve the customer perception in the US, but Asian travel retail accounts performed particularly well, as did other markets across Europe and the Middle East.
Excluding beauty, group revenues rose 4 per cent at constant currencies, while continuous cost savings helped drive an 8 per cent improvement in adjusted operating profits. Management is confident it can still achieve broadly stable revenues and operating margins this year, as well as cost savings in the region of £100m.
BURBERRY (BRBY) | ||||
ORD PRICE: | 1,825p | MARKET VALUE: | £7.51bn | |
TOUCH: | 1,824-1,825p | 12-MONTH HIGH: | 2,338p | LOW: 1,482p |
DIVIDEND YIELD: | 2.3% | PE RATIO: | 23 | |
NET ASSET VALUE: | 316p* | NET CASH: | £647m |
Half-year to 29 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2017 | 1.26 | 128 | 21.5 | 11.0 |
2018 | 1.22 | 174 | 31.9 | 11.0 |
% change | -3 | +36 | +48 | - |
Ex-div: | 20 Dec | |||
Payment: | 01 Feb | |||
*Includes intangible assets of £311m or 76p a share |