ii view: high-end Burberry targets £5 billion of annual sales

Shares in this luxury brand retailer are up year-to-date compared to a fall for the FTSE 100 index. We assess prospects. 

First-half results to 1 October

• Revenues up 11% to £1.35 billion
• Operating profit up 27% to £263 million
• Interim dividend up 42% to 16.5p per share
• Net cash of £643 million, down from £879 million in early April  

Chief executive Jonathan Akeroyd said:

"Burberry has an extraordinary legacy, a unique British heritage and a very strong platform to build on, as shown in our half-year results. Our focus in this next phase is on growth and acceleration. We have a clear plan to achieve this across brand, product and distribution and a very talented designer in Daniel Lee, supported by a passionate team. I am confident in our ability to deliver our medium-term targets and realise our potential as the modern British luxury brand."

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ii round-up:

Founded in 1856 by Thomas Burberry, today the company has become a global luxury brand with annual sales of over £2.8 billion. 

Burberry Group (LSE:BRBY) sells a range of clothing including outwear and leather goods. Retail store sales account for around four-fifths of revenues with most of the balance coming from its wholesale business. 

Retail outlets as of early October numbered 221 stores, 137 concessions, 57 outlets and 38 franchised stores.

For a round-up of these latest results announced on 17 November, please click here.

ii view:

Burberry has undertaken several transformation programmes over recent years. Current management attention includes refocusing on Britishness of its brand, growing sales including those online, and making the company more efficient. Long term, the company holds ambition to reach £5 billion in revenues, up from just under £3 billion for its last full year. During its last year, China generated its biggest slug of sales at just over a quarter, followed by the US at over a fifth.  

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For investors, the highly uncertain economic outlook offer caution, including interest rate and tax rises. Rising costs for businesses generally warrant consideration, as do its sales to China and a cooling relationship with the West. 

More favourably, an easing of pandemic restrictions in China should assist. A series of management initiatives also continue to be pursued, there's diversity of both product and geographical region, while a forecast future dividend yield approaching 3% compares to no current payment at fellow luxury retailer Watches of Switzerland Group (LSE:WOSG).

These latest results offer promise and, while the economic outlook for 2023 is poor, the luxury goods sector has proved resilient in the past.  

Positives: 

• Product and geographical diversity
• Transformation programme

Negatives:

• Souring Western relations with China
• Currency movements can provide headwinds

The average rating of stock market analysts:

Hold