Thursday, 14 October 2010

Burberry trading update: Sales up 17%

burberry prorsum campaign fall winter 2010 /

burberry released a trading update yesterday. sales were up 17% for the first six months of trading to 30th september 2010. there were a couple of interesting points made, but here is my little analysis as a consumer:

  • growth in china
china cropped up time and again in their financials press release. although there wasn't any geographical breakdown, it was reported that 30% of europe's sales were from chinese customers. this doesn't come at a surprise since much of eurozone's currency had really gone down the toilet this year, making it much more cheaper and attractive for tourists from the far east to come visit and spend.

other notable news include the buy back of 50 stores in china. this would give them more control over this fast growing market. how significant? as at 30th september, burberry owns 164 retail stores, and 30% of the stores are in china.

china is obviously a very significant and growing market for burberry. but we have yet to see an obvious design shift to deliberately appease/appeal to the chinese audience. no cheongsums, no pandas tigers or dragons in sight yet. they seem to be doing their thing, and leaving the arduous task to the marketing teams, to make the collections relevant and appealing to chinese market. and for the record, i like that.

burberry prorsum spring 2011 / getty images

  • digital media
digital media was also mentioned in several analysts' reports. burberry is one of the first to live stream their shows, the first to stream in 3D, and also one of the first to allow customers to buy straight off the runway. these initiatives created a lot of buzz and brand awareness amongst consumers. the ability to purchase straight off the runway was certainly exciting. if i remembered correctly, this was first introduced for the menswear spring summer 2011 collections held in june 2010.

this should be more significant during their fall winter 2011 menswear show in january 2011. if they deliver the products within 6 weeks as promised, the sale would be recognised before year ended 31 march 2011. whereas traditionally the items would be delivered to stores in june/july 2011 and the sale recognised in the next financial year. this should bump up sales for this financial year, but i don't know how big this pre-sales thing is for them, it seems like a good step forward.

buying off the runway isn't a new concept though. it works like a traditional trunk show, and in the latter, customers are usually given a discount for buying in advance. that isn't the case here, but could be worth considering? (of course i would say so, i'm a consumer.)

  • speeding up deliveries
as a consumer, walk around the sales hall of harrods and selfridges during the july and january months, and you will find burberry's new collections neatly displayed in one corner. to illustrate the point, i enquired about a particular FW2010 jacket from a certain french label of the moment back in september. i was informed there was still about 40% of stocks not delivered. if stocks were delivered earlier and on schedule, it will spend more time on the retail floor and chances of it selling at full price and at higher margins is also higher. this also suggests that the company is well run and efficiency is in place at the factory. this speaks volumes.

burberry share price YTD 12 oct 2010 /

burberry did very well this year, it's share price has consistently outperformed the FTSE index of uk's 100 largest companies (red line above). as an amateur investor, i bought some shares in burberry back in february 2010. if i sell them now, i will realise a nice profit, enough to buy me that really really nice and exquisite coat from burberry prorsum fall winter 2010.

but i'm holding on to the shares for now. hopefully the realised gains would go towards the deposit for my dream home in a few years time. so help me out, and buy some burberry won't you?


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