Burberry First-Half Profits Slip

Burberry Group profits declined 2.7 percent in the first half to $96.7 million, mainly due to costs from its Project Atlas information technology overhaul.

LONDON — Burberry is moving in new directions and feeling the growing pains.

Burberry Group plc saw net profits decline 2.7 percent in the first half ended Sept. 30 to 53.1 million pounds, or $96.7 million, from 54.6 million pounds, or $99.1 million, due chiefly to extraordinary costs from its long-awaited Project Atlas information technology overhaul.

Turnover in the period rose 2.1 percent to 354.9 million pounds, or $646.7 million, from 347.5 million pounds, or $630.4 million, due in large part to ongoing retail expansion, the company said in a statement Tuesday. All figures have been calculated at average exchange rates for the respective periods.

In a separate announcement, Burberry said Brian Blake, group president and chief operating officer, has resigned for family reasons. The announcement confirms a WWD report last month. Blake will remain in his post until the end of the year, and will not be immediately replaced.

In the results statement Tuesday, outgoing Burberry chief executive Rose Marie Bravo said she remains optimistic about the future.

"In the context of a period marked by strategic investment and transition, Burberry delivered a solid performance in the first half. With cold weather arriving and the holidays approaching, we enter our most important time of the year with cautious optimism," she said in a statement.

Cautious is the key word for the second half: The statement said Burberry is expecting a "moderate, underlying decline" in wholesale sales, which currently account for just more than 50 percent of turnover.

The expected wholesale sales drop is due to a variety of factors: Burberry is adding more of its own retail stores in the U.S. and therefore readjusting the wholesale-retail channel mix in that market. In Spain, Burberry will be converting chunks of its women's wear business from wholesale to a retail concession format in the fourth quarter. As a result, the company said it's expecting soft demand in Spain.

The company said a similar decline in sales and profits will take place in Taiwan, where Burberry recently has acquired its distributors. The acquisition involves 12 retail locations.

"We are a business in transition on so many fronts," Stacey Cartwright, the company's chief financial officer, told WWD. "From the arrival of a new chief executive to Project Atlas to our new retail openings to the new Luxottica eyewear license, we're undergoing a series of short-term changes that will bring big benefits in the long term."

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