DIGITAL REALITY BURBERRY ANNUAL REPORT EST. 1856
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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14
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20
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26
28
32
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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.
EXECUTIVE TEAM
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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.
FINANCIAL HIGHLIGHTS
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
14
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
THE ART OF THE TRENCH
16
THE ART OF THE TRENCH
THE ART OF THE TRENCH
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.
18
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.”
20
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.
22
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
34
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.”
FINANCIAL HIGHLIGHTS
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
36
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
£ million 2013 2012 reported FX underlying
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.
FINANCIAL HIGHLIGHTS
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.
£ million 2013 2012 reported FX underlying
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