Burberry has welcomed a rise in profits in its half-year results following new creative director Riccardo Tisci's debut collection, titled 'Kingdom'.
Burberry total revenue declined three per cent year on year to £1.22bn in the 26 weeks to the end of September.
But like-for-like store sales were up three per cent, spurred on by growth in Asia.
Profit before tax rose 36 per cent to £174m after accounting for £33m in restructuring costs and £28m related to the disposal of its beauty business. This beat company expectations of £169m.
The fashion brand’s cash flow was down to £647m from £654m last year, which it said was due to growing inventory.
Basic earnings per share rose to 31.9p from 21.5p, while the dividend per share remained unchanged at 11p.
Why it’s interesting
The results follow the arrival of new chief creative officer Tisci as the brand looks to transform its image.
Tisci’s appointment caused a stir in the fashion world as he revamped the brand’s logo, pledged to reduce waste and made the company fur-free. His London Fashion Week show was well received when it was unveiled in September.
“Burberry has proven one thing that hiring the right person for the right job matters a lot,” said Think Markets analyst Naeem Aslam.
“Designer Ricardo is the hope for the company and his collection has received exceptional response despite the fact that most products won't reach stores until February.”
Burberry has embraced social media as a way of generating “brand heat”. It has used selling mechanisms on Instagram and We Chat to carry out product drops, which the brand says have sold out rapidly in China.
Aslam said: “What Burberry has realised that it needs to create so-called fear of missing out among its customers and have more limited lines is the way forward.”
Burberry said its outlook for the full year is unchanged. But the company acknowledged the brand transformation is in its infancy and this is only an initial response.
“Burberry still needs to address the growth equation because its competitors like Gucci and LVMH are far ahead of the game,” warned Aslam.
“In other words, their growth is nearly in double-digit and Burberry has a lot to catch up.”
What Burberry said
Chief executive Marco Gobbetti said:
"We are energised by the early results as we begin to transform and reposition Burberry. The initial response from influencers, press, buyers and customers to our new creative vision and Riccardo's debut collection Kingdom has been exceptional.
“Mindful that we are only in the first phase of our multi-year plan, we continue to manage dynamically through the transition. We confirm our outlook for the full year."