Tech Revamp Hits Burberry Profits

Profits at Burberry Group dipped 4.9 percent last year as a result of costs related to the brand's technology overhaul, Project Atlas.

Burberry's sales increase last year was due in part to strong retail sales in the U.S., where the brand opened seven stores, and in Asia-Pacific, where company-owned stores in China and Taiwan performed well. The statement said new, franchised stores in emerging markets such as Istanbul, Turkey; Warsaw, Poland; São Paolo, Brazil; Jeddah, Saudi Arabia; Mumbai, Indai, and Cancun, Mexico also contributed to the rise in revenues.

Sales in Europe were flat, due to weak performance in Spain, where Burberry has just made a major transition to retail outlets from wholesale ones, and in the U.K., where sales were soft generally. The rest of continental Europe reported strong results.

As reported, Burberry reached a "tipping point" during the fiscal year with regard to its sales channels. Retail sales accounted for 42.9 percent of all sales, with wholesale sales making up 46.2 percent. Burberry has been working consistently to increase the percentage of its retail sales, buying previously franchised stores and converting wholesale corners to retail ones.

"Within the next couple of years, retail will be the predominant route to market, making up more than 50 percent of turnover," said Cartwright. "There will always be a place for wholesale as a window to the brand, and licensing should make up around 10 percent of revenue."

In the current fiscal year, Burberry plans to increase its net retail selling space by a minimum of 10 percent. New store openings will be concentrated mostly in U.S. and Asian markets.

New retail openings over the next six months include stores in Atlantic City and Riverside, N.J.; Kansas City, Mo.; Madrid, Spain; Sydney, Australia, and Vienna, Austria. The brand is also doubling the size of its Hong Kong store in Ocean Center.

As for the chief executive handover process, which began in January, Cartwright said it's been a smooth one.

"We've been very lucky, and Angela has been able to sit down with all of our suppliers, customers and international offices, and work beside Rose Marie," she said. "It's been a very, very thorough immersion."

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