Burberry's Gobbetti eyes better store productivity, promises 'new energy'
New Burberry chief executive Marco Gobbetti began his reign with an encouraging first quarter and a promise to create "new energy to drive growth" amid what he said was "a time of great change" for the company and the wider luxury industry.
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Against the backdrop of great changes, Gobbetti plans to keep the store estate largely fixed for now and focus on productivity from the current store footprint.
Retail revenue of £478m in the three months to 30 June was up 13% compared to the same period last year or up 3% on an underlying basis if currencies rates are ignored. Like-for-like retail sales rose 4%, accelerating from 1% in the last full year.
However, total revenue was down 1% due to lower average store store footprint during the quarter, compared to a 2% underlying decline for the last full year, with no material contribution from net new space is expected for the full year.
Full year guidance for profit before tax was unchanged, though the effect of foreign exchange rates is expected to have a £25m adverse effect, less than the £30m initially expected.
Retail growth in the quarter was driven by strength in mainland China and improvement at Hong Kong after a tough patch, which lifted sales by a mid single-digit percentage across Asia Pacific, helped by a full quarter of the 'tropical gabardine' trench coat, which launched in February and has sold out in parts of Asia.
Led by strength in the UK, the EMEIA region -- Europe Middle East India and Africa -- grew by a high single-digit percentage.
The Americas delivered a low single-digit percentage decline amid negative footfall trends with tourist and domestic demand down, while the strength of the dollar drove a strong increase in sales from US customers abroad.
Having taken over as CEO from Christoper Bailey on the first of the month after a few months of transition, Gobbetti said: "I am delighted to have started as Burberry CEO. We are pleased with our performance in the first quarter, while mindful of the work still to do.
"This is a time of great change for Burberry and the wider luxury industry. I look forward to building on the foundations Christopher and the team have put in place and creating new energy to drive growth."
Burberry shares shot up in early trade on Wednesday and after half and hour of trading were up 3.3% at 1,634p.
Steve Clayton, a fund manager at Hargreaves Lansdown who has a 3.6% exposure to Burberry via one of his funds, said the market had welcomed Gobbetti's arrival and what he saw as a robust trading statement, with LFL sales a little stronger than analysts expected.
He noted that UK sales are still strong, but slowing a little as the sharp drop in the value of sterling annualises, while the strength of the dollar means that US luxury consumers are spending less at home, but more overseas.
"This is an encouraging performance from Burberry, which looks to be at long last pulling out of the doldrums. The brand still has plenty of growth potential, as it has demonstrated with the success of the DK88 handbag which is selling strongly at over $2,000 a pop as big spenders return to the group’s stores.
"Near term though there’s little new space being added, and the group are planning 'brand control' in the wholesale channel later this year as they attempt to massage their brand’s perception and positioning ever higher. That will hold reported growth back a bit in the near term. But with an acceleration in new product launches set for the second half of the year, the underlying progress at Burberry should improve steadily."