Burberry enters winter in style with 8% revenue growth

As growth has slowed at the fashion chain, CEO Angela Ahrendts has been carefully snipping off the fraying ends of the business to get back on track. But cost-cutting can be expensive and Burberry was forced to post a profit warning in September. The chief culprit: a one-off charge of £78.8m to end Burberry’s fragrance and beauty licence relationship with Interparfums. This has taken profit for the last six months to £111.9m, down 29% from £158.7 in the same period last year.

Stripping out this payment, however, and a smattering of other one-off costs, profits actually rose by 6% to £173m, which was better than expected. Sales are up, driven by a 40% increase in sales of men’s accessories (everyone loves a Burberry manbag) to top £883m for the first six months to 30 September. That’s up 8% on the same period last year.

While bringing fragrance and beauty in house has ripped a hole in first-half profits, they should ensure a lucrative new revenue stream in 2013. From April, Burberry will control the global sourcing, logistics and distribution of the products. ‘Integrating fragrance and beauty is a significant brand and business opportunity,’ says Ahrendts. ‘Burberry has been diversifying its product range away from outerwear and has opened new stores in Hong Kong, Milan, Rome and London.’

Shares in Burberry rose 1% to £12.65 in early morning trading but that will be cold comfort to Ahrendts – Burberry’s share price plunged 20% after the profit warning. So far this year, the value of the company has dropped by 7%.