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Burberry Readies Road Show

The luxury IPO race is on. GUS PLC said Wednesday the road show for its luxury subsidiary Burberry would kick off the week beginning June

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LONDON — The luxury IPO race is on.

GUS PLC said Wednesday the road show for its luxury subsidiary Burberry would kick off the week beginning June 24, with trading set to start in mid-July. As reported, Burberry plans to list roughly 25 percent of its shares on the London Stock Exchange, and offer the stock solely to institutional investors.

“My night job starts now,” said Rose Marie Bravo, chief executive of Burberry, referring to her preparations for the road show. “Taking a company public is a strenuous process, and of course it’s easier if you’re well prepared. I want this to be the best IPO ever, and I will do whatever it takes to make sure it is.”

Bravo spoke to WWD on the sidelines of a news conference to announce GUS’s preliminary results, and confirm Burberry’s initial public offering.

She isn’t new to the process, having helped take Saks Fifth Avenue public in May 1996, when she was president of the department store chain. SFA subsequently merged with Proffitt’s Inc., in September 1998, and the merged entity was later renamed Saks Inc.

Merrill Lynch and Morgan Stanley will be the joint lead managers and joint sponsors of the offer while Cazenove and UBS Warburg will act as co-lead managers.

Sources close to GUS confirmed the valuation of the company would most likely fall between $1.8 billion and $2.7 billion — or about $2.3 billion. GUS chief executive John Peace said part of the money raised from the flotation would be invested in new Burberry flagships.

Burberry currently has 69 stores worldwide and Bravo said the company should have “well over 100 stores” in the short term.

Unlike the shares in Prada — which could begin its road show as early as June 17 — Burberry shares will be offered solely to institutional investors, both in the U.K. and internationally. However, once the shares are on the market, retail investors will be able to purchase them.It’s difficult to offer shares to institutional investors and retail investors simultaneously in the U.K. Because of the complexity and expense, such as separate advertising and marketing campaigns, for example, many companies choose to sell only to institutional investors at the outset. Peace declined to outline specific details of the Burberry IPO, including the price range of the shares, the exact percentage to be listed or the investors to be targeted.Sources close to GUS, however, said the “standard” pension and mutual funds and banks would be approached during the road show. Stops will include major European cities, as well as New York and Boston.

Peace said he did not view Prada’s IPO as a particular threat.

“Prada is a different business from Burberry: It is a multibrand group whereas Burberry is a single-brand one. The two companies are also going to the market for different reasons. We don’t need the money from this listing.”

Peace said GUS was taking Burberry public in order to establish a market value for GUS shareholders, give Burberry its own means to grow and build on its financial momentum.

As reported, Prada is creaking under the weight of nearly $900 million in debt, and is increasingly under pressure from its banks to raise money. Since Prada launched its $624.1 million bond last December — with help from BNP Paribas, Deutsche Bank and Intesa BCI — those banks have exercised greater control at the company and have put many of Prada’s spending and investment plans on hold.Peace also said he was confident about the current market conditions for going public — which analysts have described as neither dismal nor stellar.

“Clearly, we’re conscious of the market conditions, and we believe the luxury sector has recovered sufficiently to offer us an opportunity to seek a public offering. The Burberry business is in very good shape and we think it’s the right moment for an IPO,” he said.

As reported, in the fiscal year ended March 31, Burberry posted a 29.9 percent jump in operating profits to $131.8 million on a 17.4 percent rise in sales to $728.5 million. Burberry generated just 7.7 percent of its parent company’s revenues last year but fully 14.6 percent of operating profits. Growth took place across all categories. Burberry’s operating margin was 18.1 percent, compared with 16.4 percent last year. GUS does not break out after-tax figures for Burberry or any of its other divisions, which include the Argos Retail Group and Experian.

The lion’s share of sales — 63 percent — came from men’s and women’s apparel, followed by accessories (25 percent); licensing (11 percent) and other products (1 percent). Wholesale sales generated 58 percent of all revenues, followed by retail sales (31 percent) and licensing (11 percent).

The company added that autumn-winter 2002 wholesale orders are expected to be flat against those of last year. The firm said this was due to a drop off in international travel and tourism and the repositioning of the brand in Spain.

Burberry stated, however, those factors were offset by strong growth in the U.S. market. Sales in North America rose 21 percent to $160.6 million last year.

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