First half revenues fell 2% to £1.2bn, although that's actually 4% growth if you exclude changes to beauty wholesale. Adjusted operating profit rose 8% at constant exchange rates to £178m.
Guidance for this year and next is unchanged, with shares were broadly unmoved in early trading.
The half year dividend is also unchanged at 11p.
Macro Gobbetti is focused on consolidating Burberry's position at the very top of the value chain. That will take time, but if it can be done the rewards are considerable.
The transition involves reviewing where and how its products are sold. Digital will get more investment, while Burberry's physical stores are getting a refurb to maintain that premium image. Of most interest is the decision to cut ties with several non-luxury partners that offer its products on a wholesale basis.
The withdrawal means sales and profits are being forfeited in the short term, so Burberry is taking a bit of a gamble. However, Gobbetti has clearly come to the conclusion that selling in sub-optimal conditions, and potentially diluting the premium image, is the greater risk.
We empathise with his view. In fashion, appearances matter, and Burberry's 161 year old brand is its most valuable asset. Gobbetti appears mindful of the adage that it takes years to build a reputation, and minutes to lose it. In the UK the group is only just shaking the 'football hooligan' image its caps garnered in the early noughties.
The man tasked with enticing them back is Gobbetti's fellow Italian, new Chief Creative Officer Riccardo Tisci. He's got a good reputation in the industry, having breathed new life into the Givenchy brand in recent years and his first collection has been well received. It's early days and stock is still being updated, but let's hope he can keep hitting the right notes at Burberry.
Overall, we like Burberry. Management has shown a willingness to grasp the nettle and do the right thing for the long term. The group should be well-placed to profit from increasing affluence in the Far East, and also benefits from the fact luxury consumers are prepared to pay handsomely for that special item. This means high margins and impressive cash generation are both possible.
Half year results - Constant exchange rates
The Retail business saw revenues rise 2% to £944m, with comparable store sales up 3%. The Americas and Asia Pacific both saw mid-single digit percentage growth, while Europe, the Middle East, India and Africa were stable - as growth in Italy and UK offset weakness in the Middle East. Shop closures had a negative impact during the period, having closed a net seven stores in the half.
The group has seen good results from its new handbag range, while apparel has benefitted from a more complete wardrobe offer. The Burberry Car Coat also outperformed in the period, with customers responding well to the refreshed quilt range.
10% growth in Wholesale revenues was ahead of expectations thanks to a strength in Asia, offsetting weakness in the US.
Licencing revenues rose 142% as Beauty moved into a licencing model. Other royalties declined due to the non-renewal of the watch licence.
Retail and Wholesale delivered combined operating profits of £158m, up 1% at constant exchange rates, while licencing posted a further £20m.
Free cash flow deteriorated substantially, hitting just £46m compared to £171m last year. That reflected a substantial increase in inventory as the group launches new and updated products. The group has completed its £150m share buyback for 2019.
Net cash at the end of the period stood at £647m, compared to £654m this time last year.
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