Burberry has reported that its combined watches and eyewear delivered double-digit percentage revenue growth for the first half of 2013.
According to Burberry Group’s Interim Report, published today, The Britain watch continued to post good growth, particularly in retail. The statement said: "Burberry continues to work with its licence partners to rationalise and elevate distribution in line with the luxury positioning of the core business".
Burberry’s total revenue for H1 was £1,031 million, which was up by 17% on 2012’s £883 million. Accessories accounted for 37% of revenue in the first half, up 9% underlying, with double-digit growth in retail partly offset by lower wholesale revenue, which was said to be in line with the group as a whole. While watches performed well, Burberry revealed that its licensing revenue, which includes watches, decreased by 19% at both constant and reported Foreign Exchange rates (FX) for the six months ended 30 September 2013 but the report pointed out that excluding £10.6 million from the terminated fragrance licence relationship in H1 2012, the licensing revenue increased by 2% underlying (up 1% at reported FX). It also said that this result is in line with full year expectations of slightly positive growth at constant FX.
Burberry’s licensing makes up 4% of revenue, compared to 6% in 2012, of which approximately three quarters is from Japan, with a split of roughly 85% apparel and 15% from various short-term licences. The balance is from global product licences of watches and eyewear and European wholesale childrenswear.
Adjusted operating profit for licensing was at £36 million for H1 2013, down from the £44.7 million in H1 2012. The overall adjusted operating profit, which also included Burberry’s retail and wholesale, was unchanged year-on-year at £173.6 million.
Profit was said to have been impacted by lower wholesale revenue, the dilutive impact of the Beauty transition from licensing to direct operation and a higher performance-related pay charge. These factors were said to be offset by strong revenue growth in retail and a £3.7 million translation benefit from exchange rates. The report pointed out that if current exchange rates persist for the balance of the year, this translation benefit is expected to reverse during the second half. Looking ahead to the full year results for 2013, Burberry expects that its licensing revenue, excluding £27 million royalty income from fragrance and beauty, will be £82 million. For 2014, Burberry still expects growth from this level to be slightly positive at constant FX.
Talking about the Burberry H1 2013 results, chief executive officer Angela Ahrendts said: “We are proud to announce a first half performance that saw Burberry’s revenue exceed £1 billion for the first time, reflecting the continuing strength of our global brand momentum. We remain focused on executing our retail, digital and marketing strategies in the all-important third quarter and in what remains an uncertain macro environment. The senior team continues to balance brand appropriate revenue growth, selective investment and infrastructure efficiencies to drive sustainable profit growth across the portfolio, especially with the significant long-term potential of our fifth product division, Beauty.”