More on Burberry
Burberry: 2005/6 results
Not only was Burberry’s growth for the year much lower than in the previous year, but this year should be significantly better as wholesale revenues return to growth.
Retail revenues rose 11%, broadly in line with the expansion in space, and licensing 6%, but wholesale revenues declined 4%. Total underlying sales growth was 3%, with an acquisition (of a distributor) and the transfer of outlets within department stores in Spain to Burberry (as concessions) adding another 1%.
Operating margin shrank even after adjusting for the costs associated with implementing new logistics and enterprise systems, probably the result of the costs of operating the increased selling space the company now has - an increase that has not been accompanied by equal sales growth.
Gross margin increased slightly, so at least Burberry is not facing any problems with pricing.
Burberry’s plans for this year include a return to (low) growth in wholesale sales and a similar increase in retail sales to this year, but flat licensing revenues.
At 452p Burberry is on a demanding historical PE of 19× with a 1.8% yield. Growth should return but the inconsistent performance of wholesale and licensing makes us cautious, particularly given that there is plenty of good value in the sector at the moment.
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