IT Costs Cut Into Burberry Profits

Burberry said Tuesday that net profits slipped 6 percent to 49.9 million pounds, or $92.3 million.

A look from Burberry

A look from Burberry.

Photo By WWD Staff

LONDON — Burberry said Tuesday that net profits slipped 6 percent to 49.9 million pounds, or $92.3 million, in the first half ended Sept. 30, due entirely to costs of Project Atlas, the group's IT and operational overhaul program.

This compares with net profits of 53.1 million pounds, or $96.7 million, in the corresponding period a year earlier.

Revenue at Burberry rose 10.4 percent to 392 million pounds, or $725.5 million, from 355 million pounds, or $646.6 million, powered by retail sales of outerwear, women's wear and the new Burberry Icons accessories collection.

Stripping out the costs of Project Atlas, which the company said had tracked to plan and budget during the period, operating profit would have risen 7 percent to 84.2 million pounds, or $155.8 million, from 78.8 million pounds, or $143.5 million.

All figures have been calculated at average exchange rates for the respective periods.

"We're bang on track with all the figures, and they are consistent will full-year projections," Stacey Cartwright, chief financial officer, said in a joint telephone interview with chief executive Angela Ahrendts.

With regard to Project Atlas' financial implications for the current 2006-07 fiscal year, the company continues to expect to realize benefits of approximately 6 million pounds, or $11.1 million, and incur expenses of 19 million pounds, or $35.2 million.

Meanwhile, Burberry has been pushing hard to boost retail sales as a percentage of overall revenue, and in this half, retail rose to 43 percent of sales from 35 percent in the previous period.

A continuing priority has been store openings, and in the first half, Burberry opened six new stores in cities including Sydney, Istanbul and Madrid — one replacement store and five concessions — and two outlets.

"We're changing our mind-set from luxury wholesaler to specialty retailer, and Project Atlas has enabled us to do that," said Ahrendts.

"We're now able to flow fresh goods into stores every month. In the past, there were two markets per year, with two major delivery drops — and no formal flow strategy," she added.

Its plan is to increase selling space 13 to 14 percent in the full fiscal year, and the company planted its checked flag for the first time in Austria, Ukraine and Mexico.

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