burberry annual report

DIGITAL REALITY

BURBERRYANNUAL REPORT

EST. 1856

Burberry Group plc is a British luxury fashion house, distributing clothing and fash-

ion accessories and licensing fragrances. Its distinctive tartan pattern has become

one of its most widely copied trademarks. Burberry is most famous for its trench

coat, which was designed by founder Thomas Burberry. The company has branded

stores and franchises around the world and also sells through concessions in

third-party stores.

In 2011/12, Burberry was named the fourth-fastest growing brand globally by both

Interbrand and WPP/BrandZ, behind Apple, Google and Amazon. It was included

in Interbrand’s ‘Top 100 Global Brands’ for the third consecutive year, received

the Luxury Briefing ‘Inspiring Luxury Loyalty’ award and was recognised as one of

six best practice advertising case studies by Asia’s largest search engine, Baidu.

At Burberry everything begins and ends with great product, combining a focus

on core categories with continuous innovation. There was significant investment

during the year in upgrading the brand’s wholesale presence, through the addition

of shop-in-shops, the closure of accounts and exiting from outerwear departments.

In Japan, where the majority of the Burberry business is still under licence, the

company continued to terminate various non-apparel licences while implementing

merchandising and marketing activities focused on the global collection.

COMPANY OVERVIEW

DIGITALLY MOVING

CHAIRMAN’S LETTER

EXECUTIVE TEAM

FINANCIAL HIGHLIGHTS

BRAND STRATEGY

THE ART OF THE TRENCH

THE BRAND

EXPERIENTIAL FASHION

DIGITAL ADVANCEMENTS

THE BURBERRY FOUNDATION

MARKETING AND DIGITAL MEDIA

THE FUTURE OF BURBERRY

FINANCIALS

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DIGITALLY MOVING4

Buberry was established in 1856 as a compnay that supplied British exploeres with coats and tents for polar expeditions. But it has moved far beyond its roots, reinventing itself as one of the most forward- thinking fashion marketers in the world. Much of that credit goes to Christopher Bailey, Burberry’s dapper chief creative officer. Mr. Bailey oversees nearly every aesthetic aspect of the company, from fashion lines to retail loca-tions to marketing. “Anything anyone sees, smells, hears or touches,” he told Ad Age during an interview at the newly redesigned

Burberry flagship in Chicago, which re-opened in November. Integral to Mr. Bailey’s strategy -- and what sets Burberry apart from other fashion houses -- is his dedication to digital and the seemingly effortless weav-ing of the medium into eerything the brand does. “Digital is something that should never be an afterthought -- it should never be a checklist that is something to do,” Mr. Bailey said. “Digital for me is not a project; digital is a way that we live. If you deal with it as a project, it will always be superficial.” Mr. Bailey pointed to efforts such as “Art of the

Trench,” which features consumers wear-ing the iconic trench coat, and “Burberry Acoustic,” which features collaborations with British musicians, as examples of how Burberry branches out beyond traditional marketing. Mr. Bailey, who is always dressed head-to-toe in Burberry, refers to the fashion empire as an “old-young company... It’s 156 years old, but it’s a very young team, so digital is just part of our lives... It just felt counterintuitive to not do digital.” Important in Mr. Bailey’s strategy is the melding of the digital and physical worlds.

“Digital is something we used to bridge all our different worlds.” That dedication to digital has helped Burberry become a truly global brand with a consistent message com-municated around the world. Burberry only started getting attention for its digital efforts in the past few years. In 2009, it was one of the first fashion houses to live-stream a runway show. It’s also been known to tweet images of a new collection before a show, effectively giving its Twitter followers a glance at the line before front-row celebri-ties and high-powered editiors get one. The

commitment to social media has altereed the company, particularly its production sched-ule. Burberry is one of the only brands that allows consumers to buy clothes immediately after models walk down the runway in them. Still, at the same time Burberry is becoming an interesting digital player, it has become even more relevant and exciting as a fashion player. Burberry had come to be seen as a stodgy, tired brand that put its signature checkered print on far too many items. But the brand has seen a turnaround in percep-tion and has been appealing to a wider and

younger audience. Burberry;s strategy has always been to have a point of view, be true to ourselves and be innovative. Through new Fall and Spring fashion lines, Burberry strives to expand digitally, in order to see how cus-tomers react to it and spread the word. It is a test that we as a company are doing to learn more about technology, customer behavior and its relevance.

At this time last year, I reported an his-

toric year for Burberry in 2010/11, while

expressing some caution for the year

ahead. For 2011/12, I am pleased to report

that the team successfully executed an

ambitious plan despite an uneven ex-

ternal environment, producing another

record year. From a strategic perspective, the team focused on refining and executing Burberry’s five core strategies. The brand continues to ascend, backed by some of the most forward thinking digital marketing in the consumer sector. Ongoing design innovation sustains a compelling product proposition. With 14% av-erage space growth, retail expansion remains on pace in both existing and new markets. The brand is actively building a leading presence in the important new growth luxury markets. Ef-ficiency improves across operating functions.

LETTER FROM THE CHAIRMAN

The 2012 fashion show showed off handmade trench coats for any weather condition.

Every Burberry store is unique, original and ornate in design, architecture and materials.

6

These activities produced excellent prog-ress for the year, and continued to build a powerful foundation for the future. With this, the Group achieved record financial results in 2011/12. Total revenue grew 24% to £1,857m. Operating profit increased 25% to £377m. After-tax return on capital remained strong at 37%. All of these figures are on an adjusted basis. The Group ended the year with a £338m net cash balance. The board has recommended a 25% increase in the full year dividend to 25p. Looking ahead, 2012/13 may present continued challenge. Although the global macroeconomic picture has gener-ally improved with distance from the financial crisis, this is not uniformly true. On an economic basis, 2012/13 is likely to be less supportive for luxury. China’s growth is slowing, some Eurozone countries will see recession and the US recovery is gradual. And political tensions in certain regions present concerns. Professional observers

of the sector are unusually divided on its near-term outlook. Against this immediate backdrop, longer-term prospects for luxury’s continued growth are favourable – supported by democratisation, wealth creation, the rise of growth market consumers. In planning 2012/13, management and the board consid-ered these factors. During the year, the board had invested in deepening its knowledge of Burberry’s business through broader sector analysis, exposure to additional levels of management, and in April 2012, a trip reviewing four of the Group’s most important markets in Asia. In the end, measuring an external envi-ronment potentially suggesting short-term investment moderation against the brand’s long-term opportunity in luxury – particularly in the context of aggressive pursuit of market share by sector peers – we concluded the benefits of pursuing Burberry’s long-term opportunities in luxury should outweigh any

immediate issues stemming from a difficult environment. This approach is further sup-ported by the brand’s momentum, manage-ment’s track record and the Group’s finan-cial resources. Accordingly, the team has committed to another determined plan, while remaining vigilant and prepared to react to external developments. Before concluding, a brief look further back. July 2012 marks the tenth anniversary of Burberry as a listed company. From its initial £1.15bn market capitalisa-tion in July 2002, Burberry is valued in excess of £6bn at the time of this letter (May 2012). During these past ten years, the Group has also returned £780m to shareholders through share repurchase and dividends. On behalf of the Board and shareholders, I thank the team around the world for their contributions to these results. Burberry pos-sesses the right strategy, right culture and right team for continued success.

SIR JOHN PEACECHAIRMAN

The 22 ft digital wall in the London Flagship store displays our featured music artists.

The beautiful, fully lit flagship London Store.

Loyal facebook fans recieved beauti-ful embossed invitations to current fashion shows.

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Through more coordinated use of brand assets and greater integration of its global organisation, Burberry has

the opportunity to enhance consumer responsiveness and operate more efficiently and effectively. This potential

lies in both the front and back-of-house operations.

Burberry sells its products

to the end consumer through

both retail (including digital)

and wholesale channels. For

2011/12, retail accounted for

68% of revenue and wholesale

26%. Burberry also has licens-

ing agreements in Japan and

globally, leveraging the local

and technical expertise of its

licence partners.


TOTAL REVENUE£1,857m1211

10

09

08

10*

RETAIL REVENUE£1,270m12

1110

0908

10*

WHOLESALE REVENUE£478m121110

0908

10*

ADJUSTED OPERATING PROFIT£376.9m12

1110

09

08

10*

DIVIDEND PER SHARE25.0p121110

08

09

10

1%1% of Group profit before tax

donated to charitable causes, the majority of the

Burberry Foundation.

32%32% points increase in primary

transport shipped by sea.

70%

Over 70% increase in uptake of global Sharesave Scheme.

68%

Over 68% of Burberry Foundation employ-ability programme graduates obtained employment or re-entered education.

Burberry is leveraging the energy of

its creative thinking culture to influ-

ence positive outcomes at all levels

from its own organisation, to its busi-

ness partnerships, wider community

engagement and global societal and

environmental impact.

20%Burberry continues to increase its purchase of renewable electricity. All of its UK sites and 20% of those in the Americas are now powered

in this way.

Scan to gain VIP access to

videos of the 2013 fashion

show and after party

Founded in 1856, Burberry today remains quintessentially British, with out-

erwear at its core. Digital luxury positioning and the optimisation across in-

novative mediums of the trench coat, trademark check and Prorsum knight

heritage icons make the brand purer, more compelling and more relevant

globally, across genders and generations.

THE BRAND

A closely connected, creative thinking culture encourages

cross-functional collaboration, intuition and a meritocratic ethos. United by open

communication and a pure brand vision, and inspired by the company’s core values –

Protect, Explore and Inspire – compassionate global teams give back to their

communities through the Burberry Foundation and socially responsible initiatives.

THE CULTURE

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Disciplined execution, constant evolution and balance across channels, regions and

products underpin the management of the business. Innovative product design, digital

marketing initiatives and dynamic retail strategies drive consistent performance.

THE BUSINESS

Burberry continued to advance its leading position on social media in the luxury sector,

more than doubling Facebook fans and YouTube views, while tripling its followers on

Twitter. Visits to the Art of The Trench social media site increased by more than 60%.

Tweetwalk, launched in partnership with Twitter, enabled followers to see images of the

menswear and womenswear collections first, before they went down the runway.

THE WEB


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In 2009, the same year Bailey became Burb-

erry’s chief creative officer, the company

launched Art of the Trench, a photo-sharing

website dedicated to images, past and pres-

ent, of people sporting the Burberry trench

coat. Art of the Trench showcases images

from professional fashion photographers,

Magnum photographers and the public and

includes contributions from celebrated

fashion photo-blogger Scott Schuman, better

known as The Sartorialist. The company de-

scribes the site as ‘a living document of the

trench coat and the people who wear it’. Al-

though showcasing specially commissioned

professional photography, importantly Art

of the Trench is also partly user-generated.

Visitors can submit their own images, as well

as choose their favourite photos, comment on

individual pictures and share them with oth-

ers. The gallery also links out to the websites

or Facebook pages of each contributor.

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Art of the Trench is a living document of the trench coat and the people who wear it. The project is

a collaboration between Burberry and some of the world’s leading image makers, including a se-

ries of specially commissioned trench coat portraits by Scott Schuman of the Sartorialist and iconic

Magnum photographers.

A simple but slick interaction design aids

browsing the collection (pictures can

filtered by popularity, gender, style, colour

and weather) and the deft use of a fading

soundtrack. In true viral style, the user in-

volvement in Art of the Trench has generated

much valuable marketing and promotional

activity. Between its launch in November

2009 and mid-2010 the site had already

notched up more than 7 million visits. The

social networking aspects of the site position

Burberry firmly in the web 2.0 world. The use

of digital media also helps to bring a younger

audience to the brand, building a new gen-

eration of Burberry wearers and enthusiasts.

Digital media, and the strategy that Bailey

developed, has been hugely important to

Burberry’s repositioning and resurgence and

to making it significant in the 21st century.

The Art of the Trench symbolises the com-

pany’s commitment to contemporary com-

munications channels. Burberry’s curatorial

preparation of public content and bespoke

commissions lends the Art of the Trench a

level of quality above most other brands’ at-

tempts at user-generated content initiatives.

Other digital output driven by Bailey includes

the 3D streaming of live fashion shows, in an

attempt to challenge perceptions that these

shows are for the industry and not for the

consumer. To this end, viewers have been

able to order showpieces online, directly

from the catwalk.

VIP guests recieved iPads at

fashion shows to customize or buy, classic

Burberry trench coats.

To see more of Bailey’s inspiration for the Fall/Spring 2013 fashion line scan the Burb-erry code to view on your mobile device.

By viewing on your mobile device, this bridges the gap between the online and retail shopping experiences. Although one will not be able to examine and try on the garments and accessories in the collection, they will have access to employee advice and assistance, among other benefits — such as “the clothes, the music, the energy and the atmosphere.”

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BURBERRY FASHION

2013

After a string of charming but muted celebra-

tions of the artisan’s hand, Burberry was

actually in need of some pop electricity, and

Bailey used it effectively (bar the shiny sandals

with the black socks). Surely you can only look

at a soberly toned, leanly tailored suit so many

times before you surrender to the desire to

juice it with a shirt in an ice-blue metallic silk.

Or maybe you’d rather wrap it in a fuchsia-

shaded foil trench. The effect was stunning in

the metallic leather blousons that closed the

show. Instead, eye-popping metallics to repel

the never-ending deluge, true Brit grit going

glam in defiance of bloody-minded Mother

Nature. The point about Burberry is that it

provides something for all ages, day to evening,

city and country, and, at this commercial level,

ease and familiarity probably makes more

sense than too much “fashion.”

Burberry Regent Street in London blurs the

physical and digital world to create ‘Burberry

World Live’, which claims to offer customers

the physical expression of the brand’s most

innovative digital launches in recent times.

The launch of the landmark store today (13

September) comes in the same month that the

luxury retailer issued a profits warning, saying

sales had stalled. The store’s features include

a 22ft-high screen, 500 hidden speakers and

a hydraulic stage. It also showcases RFID

microchips – radio-frequency identification – in

some of its clothes. This means that when a

customer wears the microchipped clothing,

they can look into a mirror that transforms into

a screen, which shows how the garment would

look on a catwalk. There will also be a digitally

enabled gallery and events space. According

to Burberry, 1% of the value of all purchases

made in Burberry Regent Street will go to

support the work of the Burberry Foundation,

its charitable arm. Angela Ahrendts, Burberry

chief executive officer, said: “Burberry Regent

Street brings our digital world to life in a physi-

cal space for the first time, where customers

can experience every facet of the brand

through immersive multimedia content, exactly

as they do online. Walking through the doors is

just like walking into our website. It is Burberry

World Live. Christopher Bailey, Burberry chief

creative officer, said: “Burberry Regent Street

is one of the most architecturally and culturally

significant projects we have undertaken. In

renovating this iconic London building, we have

worked with some of the UK’s finest craftsmen

to restore a wealth of historic features, at the

same time as pushing the boundaries of digital

technology”.

EXPERIENTIAL SHOPPING

THE STORE COVERS FOUR

FLOORS AND IS THE

LARGEST BURBERRY

BRANCH IN THE WORLD.

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Covering four floors, 121 Regent Street is the biggest Burberry branch in the world

and is twice the size of its New York counterpart.

Described as where “the digital world meets the physical” — using technology from the Burberry World website — the store includes a 22ft-high screen — be-

lieved to be the largest in a shop, 500 hid-den speakers and a hydraulic stage.

Scan to view more information and

videos about Burberry Acoustic - all

of the talented musicians.

DIGITAL ADVANCEMENTS

Scan to view Burberry’s collaboration with The Weather Channel as well as a live camera stream of London’s weather conditions.

British fashion brand Burberry is marrying

its heritage and the elements through its first

weather-themed campaign that comprises an

application sponsorship, out-of-home ads and

social media.

In an effort that also somewhat combines the

2012 London Olympics, Burberry is comple-

menting its mobile app sponsorship with a

social push and out-of-home placement in

flagship cities. The unique idea could not work

for every brand, since Burberry’s products

and brand DNA is intertwined with weather

elements, according to an expert. “British-

ness runs like a red thread through Burberry’s

DNA and the leitmotifs of British weather and

London, specifically, have been featured con-

sistently throughout its campaigns and mes-

saging,” said Rebecca Robins, London-based

European director for Interbrand and co-author

of the new book ‘Meta-luxury: Brands and the

Culture of Excellence.’ “This idea is a compel-

ling, engaging and playful way of reinforcing

that intrinsic connection. “It is authentic to the

brand, it is true to its heritage and it shows an

inherent understanding of what we talk about,

in terms of meta-luxury, of the holy trinity of

knowledge, purpose and timelessness,” she

said. “It is a clever play on celebrating the

iconic origins of a brand born of raincoats,

while creating wider awareness as a brand for

all seasons.” Ms. Robins is not affiliated with

Burberry, but agreed to comment as an industry

expert. Burberry declined comment for this ar-

ticle. Showered with affection Burberry is using

the weather element to tie itself to its London

heritage which is famous for its rainy weather.

The fashion label explores these elements in

many of its campaigns. Burberry will continue

to sponsor The Weather Channel’s app for the

iPad through Aug. 17.

Consumers can see the Burberry logo peek-

ing out on the top right-hand corner above the

local weather. When they tap on the back-

ground of the screen, the weather menu drops

down and a slanted shot of London’s current

weather and time of day is shown. Burberry is

also integrating social media into its weather-

themed campaign. Its Twitter and Facebook

accounts have been streaming pictures and

weather reports from London.

26

Spanning over 1,000 ft, Burberry projected seasonal campaigns over

city buildings.

Scan to scroll through fashion show archives

and Burberry history on your iPhone or iPad.

Established in 2008, the Burberry Foundation

(registered charity in England and Wales,

registered no. 1123102) is a philanthropic or-

ganisation dedicated to helping young people

realise their dreams and potential through the

power of their creativity.

Through the generous donations of Burberry,

its employees and customers, the Foundation

works to help young people gain confidence,

build connections in their communities, and

grasp opportunities to succeed. We accomplish

these goals by granting financial support and

combining that with the knowledge, creativity

and dedication of Burberry employees. A key

extension of the tradition of philanthropy at the

company, the Burberry Foundation provides a

strategic platform for Burberry’s engagement

in community initiatives and builds charitable

giving in key regions where the majority of

Burberry employees live and work. The Burb-

erry Foundation recognises the nature of explo-

ration has changed, however the challenges

young people face today are no less daunting

than the South Pole was a century ago.

Just as Burberry clothed and encouraged

past explorers, the Burberry Foundation helps

young people navigate the uncertain terrain

of their age and the complex world in which

we live today. By helping them to develop new

skills, confidence and ambition, the Burberry

Foundation aims to kindle their innate creativity

and empower them to realise their dreams.

“HELPING YOUNG

PEOPLE REALISE THEIR

DREAMS THROUGH

THE POWER OF

THEIR CREATIVITY”

THE VISION28

THE BURBERRY

FOUNDATION

The Burberry Foundation’s grant mak-ing is focused on supporting innovative

programmes and building sustainable partnerships with charitable organisa-

tions that help young people.

Scan to view press releases, and to sign up for media alerts when new information and press releases are added.

MARKETING & DIGITAL MEDIA

To keep Burberry growing, Ahrendts recognized she needed to woo younger and more global consumers, who commu-nicate and share information -- and shop -- in the digital world. She set out to develop a comprehensive technology strategy, one that utilizes obvious tools such as Face-book and Twitter, and also incorporates enterprise software from companies such as Salesforce and SAP.

32

Burberry is as obsessed with the future as it

is with the past. It thrives on both. It games

Twitter whenever it holds a catwalk, relent-

lessly pursues the latest net platforms from the

proven (Instagram) to the suspect (G oogle+),

and has mastered the art of YouTube through

its Burberry Acoustic initiative. None of these

are e-commerce initiatives.

What they are, however, are an unending

reminder of the British fashion house’s other

core strength: it’s history. Every tweet is a

reminder of Thomas Burberry’s prorsum knight,

every music video a reminder of the brand’s

English extraction – all of it is heritage infused

modernity. And that fusion, so mastered by

Burberry in the digital world, bleeds from the

binary into the real on Regent Street. The ap-

proach makes Burberry a standout in the luxury

business, which has historically shied away

from technology for fear of eroding its aura of

exclusivity. “What they’ve done, that no other

organization in the fashion industry has done,

is put a relentless focus on digital innovation,”

says Maureen Mullen of tech think tank L2.

The employees scuttling around Burberry’s

Horseferry House in London are too well

dressed to allow the company’s headquarters

to be mistaken for a tech startup, but the build-

ing does exude the same kind of feel. Seventy

percent of the employees at Horseferry are

under 30 and are encouraged to peruse Face-

book and Twitter during work hours. Ahrendts,

51, spearheaded the office’s free-lunch perk

à la Silicon Valley. Today, Burberry has more

Facebook and Twitter followers than any other

luxury brand of those tracked by consultancy

Stylophane. The company spends about half

its media budget on digital but concedes it isn’t

easy to calculate a return on the resources

poured into Burberry’s technology.

14,752,367

1,559,715

651,415

54,35721,552,048

FACEBOOK LIKES

INSTAGRAM FOLLOWERS

TWITTER FOLLOWERS

VIDEO VIEWS

YOUTUBE SUBSCRIBERS

THE FUTURE OF BURBERRY

NUMBER OF STORES IN EMERGENING MARKETSmeasures the reach of the Burberry brand in these high potential countries

154 31 MARCH 2012/201312

1110

0809

154

136

111

91

79

REVENUE BY CHANNELUnderlying is calculated at constant exchange rates

LicensingWholesale

Retail

£109m

£1,270m

£478m

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Burberry, the British fashion house, is best

known for the trench coats it has produced

since 1856. But more recently, the brand is

becoming known for its investment in technol-

ogy. While Burberry has tried to remain at the

forefront of fashion and technology, it hasn’t

necessarily resulted in greater sales. “Burb-

erry’s share price slumped by 18% after the

company warned that profits would be at the

low end of expectations. It is likely to make

around £400m ($650m) for 2012-13, a modest

rise from last year’s £376m.” Burberry’s most

recent venture, called “Customer 360,” looks

to track all of a customer’s buying habits so

that sales associates can bett er recommend

other products to buy. “Customer 360” is due to

be tested in the new London store next spring.

It will mean that Burberry keeps a detailed

database on each customer’s spending habits.

That could cause embarrassment, for example

if a customer who has bought racy gifts for his

mistress enters a Burberry store with his wife

and is enthusiastically ushered to the skimpy

bikinis. Burberry emphasises that customers

will be asked whether they want to opt into the

scheme or keep a penchant for chic swimwear

private. An earlier idea of using RFID tags to

“read” which Burberry clothes customers

are wearing when they walk into a store has

been postponed after worries that some may

find it creepy. Whether all this pays off is to be

foreseen but Ahrend will continue using the

latest technology. “I’ve seen what has hap-

pened to brands like Kodak that did not keep

up with digital change,” she says. “That’s a

lesson in what to avoid.” If prices are to remain

high, then the brand has to keep attracting new

generations of well-off luxury-lovers. Jaana

Jatyri, an analyst for Trendstop, is optimistic

about the future for Thomas Burberry’s heirs.

“Luxury customers are now very savvy and

quick to make purchasing decisions,” she says.

Grabbing their attention digitally may well be

the best way to ensure that their next splurge

will be on Burberry’s recycled reptiles, rather

than on someone else’s.

“INTERACTIVE MIRRORS TRANSFORM INTO

PERSONALIZED SCREENS.”


Revenue of £1,857m, up 24% Year-end net cash of £338m

£1,857m +24% £338m

Adjusted retail/wholesale operating margin of 16.4%

Adjusted diluted earnings per share of 61.6p, up 26%

16.4% +0.8% 61.6p +26%

Adjusted profit before tax of £376m, up 26%

Full year dividend per share of 25.0p, up 25%

£376m +26% 25.0p +25%

£ million 2013 2012 reported FX underlying

Year to 31 March % change

RevenueCost of Sales

Gross MarginOperating Expenses*

Adjusted operating profitNet finance charge*

Adjusted profit before taxationExceptional items

Profit before taxationTaxationDiscontinued operationsNon-controlling interest

Attributable profit

Adjusted EPS (pence)-EPS (pence)Weighted average number of ordinary shares (millions)

Adjusted measures exclude restructuring costs, the China put option liability finance charge and discontinued operations

* Operating expenses in the table above exclude restructuring costs of nil in 2012 (2011: £1.0m credit) included in the reported expenses of £922.0m (2011: £707.6m). The net finance charge in the

table above excludes a £10.2m China put option liability finance charge (2011: £3.2m) included in the reported finance charge of £10.9m (2011: £6.4m)

# Discontinued operations in Spain in 2012 delivered a loss of £0.3m (2011: £6.2m)

~ EPS is calculated on a diluted basis

1,857.2(558.3)

1,298.9(992.0)

376.9(0.7)

376.2(10.2)

366.0(100.6)

(0.3)(1.8)

263.3

61.659.3

444.3

1,501.3(491.6)

1,009.7(708.6)

301.1(3.2)

297.9(2.2)

295.7(83.2)(6.2)

2.1

208.4

48.946.9

444.0

24(14)

29(30

25_

26

24

23

23

24

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REVENUE ANALYSISREVENUE BY CHANNEL

RETAIL68% of revenue (2011: 64%); generated from 192 mainline stores, 208 concessions within depart-ment stores, digital commerce and 44 outlets- Retail sales increased by 31% on an underlyingbasis (32% at reported FX)

- Comparable store sales growth was 14%(H1: 16%; H2 12%)

- The acquired stores in China contributed 6% ofthe 31% underlying growth, up to the anniversaryof their acquisition from 1 September 2010

- The balance of growth (11%) came from new space

- Average retail selling space increased by 14%,with the acquired Chinese stores contributingan additional 5% space


Year to 31 March % growth

RetailWholesaleLicensing

1,270.3478.3108.6

1,857.2_

1,857.2

Revenue - continuing operationsDiscontinued Spanish operations

962.3440.698.4

1,501.349.3

1,550.6

329

10

24

3185

23

In mainline stores in the year, growth was bal-anced, with double-digit increases in all regions and product divisions, underpinned by core outerwear and large leather goods, which accounted for about half of sales. The penetration of replenishment styles remained at about 50% of mainline revenue. New merchandising strategies gained traction, including knitwear and men’s tailoring (doubling in the year from a small base).

Burberry London and Prorsum accounted for around 45% of mainline apparel revenue (2011: 40%). Average selling prices continued to increase due to product mix, pricing increases and better full price sell-through. Digital commerce sales, including via iPads in store, continued to outperform.

There was double-digit growth in mainline comparable store sales in all four regions.

ASIA PACIFICRetail accounted for about 85% of Asia Pacific revenue, including a full year’s contribution from the Chinese stores acquired in September 2010.There was double-digit comparable store sales growth in China, Hong Kong, Singapore and Taiwan, while the Korean market was soft. Burberry’s small retail operations in Japan sell-ing the global non-apparel collection made solid progress.

EUROPERetail accounted for about two-thirds of Europe revenue. There was double-digit mainline com-parable stores sales growth in the UK, France and Germany, especially in flagship markets. Southern Europe, especially Italy, remained weak.

AMERICASRetail accounted for about two-thirds of Ameri-cas revenue, with double-digit comparable store sales growth in theyear. Space was added mainly in Brazil and Mexico, while continuing to rationalise and upgrade US outlets.

REST OF WORLDRetail accounted for just over half of revenue for Rest of World. The largest contributor was Burberry Middle East with 17 stores in the United Arab Emirates, Kuwait and Qatar. These delivered double-digit comparable storesales growth during the year, with some slowdown in the fourth quarter. Five franchise stores in Saudi Arabia were transferred into a subsidiary in which Burberry has a 60% stake. The business in India, which has seven stores, continued to perform strongly.


Retail/wholesale adjusted operating profit grew by 31%to £286.9m. Burberry, as guided, dynamically managed gross margin and op-erating expenses to enable further investment in the business while modestly improving the operating margin – up 80 basis points to 16.4%.

The improvement in the operating margin was second half weighted (H1: up 10bp; H2 up 130bp) reflecting the phasing of investment and costs and the higher absolute revenue base in the second half than the first half.

Gross margin for the year increased by 320 basis points to 68.1%. The key drivers were the conversion of China from wholesale to retail, its subsequent outperformance, benefits from pricing and sourcing and further channel and regional mix shifts.

Operating expenses as a percentage of revenue were51.7%, reflecting the shift to retail.


Year to 31 March % growth

Retail/ WholesaleLicensingAdjusted operating profitAdjusted operating margin

286.990.0

376.920.3%

219.581.6

301.120.1%

3110

25

314

23

Adjusted operating profit increased by 25% to £376.9m, including a £5.4m translation benefit from exchange rates.

£ million 2013 2012 reported FX

Year to 31 March % change

RevenueCost of salesGross marginGross marginOperating expensesAdjusted operating profitOperating expenses as % of salesAdjusted operating margin

1,748.6(558.3)

1,190.368.1%(903.4)

286.951.7%16.4%

1,402.9(491.6)

911.364.9%(691.8)

219.549.3%15.6%

25(14)

31

(31)31

38

£ million 2013 2012 underlying

Year to 31 March Year to 31 March 2012

RevenueCost of SalesGross MarginGross MarginOperating expensesOperating profitOperating margin

108.6_

108.6100.0%

(18.6)90.0

82.9%

98.4_

98.4100.0%

(16.8)81.6

82.9%

103.2_

103.2

(18.7)84.5

LICENSING OPERATING PROFIT

Mainline stores Concessions Outlets Total Franchise Stores

Directly- Operated stores

At 31 March 2011AdditionsClosuresTransfers*At 31 March 2012

17423

(10)5

192

19925

(16)_

208

569

(3)(5)57

STORE PORTFOLIO

447

(7)_

44

41755

(33)5

444

STORE PORTFOLIO BY REGION

Mainline stores Concessions Outlets Total Franchise Stores

Directly- Operated stores

Asia PacificEuropeAmericas*Rest of WorldTotal

54387426

192

1525312

208

17233

1457

1016171

44

2161079229

444

“SEAMLESSLY BLURRING

PHYSICAL AND DIGITAL WORLDS”

BURBERRYANNUAL REPORT

EST. 1856

burberry annual report

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