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REFILE-UPDATE 2-Burberry aims to quadruple Japan sales under new CEO
May 21, 2014 / 6:42 AM / in 3 years

REFILE-UPDATE 2-Burberry aims to quadruple Japan sales under new CEO

(Refiles to fix garble in second paragraph)

* New CEO Christopher Bailey started new role May 1

* FY adjusted pretax profit 461 mln stg, up 8 pct

* Revenue 2.33 bln stg, up 17 pct

* Sees impact on 2014-15 profit from currency headwinds

* Shares flat

By James Davey

LONDON, May 21 (Reuters) - Burberry’s new chief executive hopes to quadruple its revenue in Japan by 2017 as the expiry of third-party sales licences give the company a free rein to expand in the world’s second-largest luxury goods market.

The British maker of luxury clothing and accessories has been taking back control of important parts of the business from licensed vendors who sell its goods and investing heavily to develop them alone.

The Japan licence expiry in June next year will be the final step in that strategy and a major test for Burberry boss Christopher Bailey, who took the helm this month and remains the company’s chief creative officer.

Burberry said its four stores, 10 concessions and small wholesale business in Japan generated 25 million pounds of revenue in its 2013-14 financial year, but no profit.

The company, best known for its camel, red and black check pattern, plans to open shops in Omotesando and Shinjuku, Tokyo and Osaka and add about 20 concessions in department stores by the end of the 2016-17 financial year.

With a further boost from in-house and third-party digital platforms, it said it aims to achieve 100 million pounds of retail sales in the country and about 25 million pounds in profit by 2016-17.

Bailey’s performance-dependent maximum pay package of 10 million pounds ($17 million) depends partly on meeting those goals and getting more revenue in fragrances and beauty products after the firm began directly operating that business last year.

Bailey’s predecessor Angela Ahrendts, who has joined U.S. tech giant Apple, achieved an 8 percent rise in profit in the year to March 31, in line with analyst forecasts.

The 158-year-old company repeated a warning that if foreign exchange rates remain at current levels there would be a material impact on 2014-15 profit.


Bailey, 43, succeeded Ahrendts on May 1, although his appointment was announced in October.

Although some investors have fretted over his dual creative and executive role, shares in Burberry are up 2 percent over the last six months.

They were flat at 1134 GMT, valuing the business at 6.7 billion pounds.

“Bailey elucidated clear goals going forward, placing the emphasis on unlocking Japan, accelerating the beauty division and initiating expansion into underpenetrated markets,” said analysts at retail research group Conlumino.

Burberry made a full-year adjusted pretax profit of 461 million pounds - in line with a consensus analyst forecast, on revenue up 17 percent at 2.3 billion pounds.

It ended the year with net cash of 403 million pounds, raised its full-year dividend by 10 percent to 32 pence and said it was confident of driving sustainable future growth.

But as an indication of the potential hit from currency headwinds, it said rebasing 2013-14 retail/wholesale profit for current exchange rates reduced its actual reported profit by about 40 million pounds.

It said that, at current exchange rates, reported licensing revenue in 2014-2015 would be reduced by about 10 million pounds because of movement in sterling against the yen.

Burberry expects net new space to contribute low to mid single-digit percentage growth to total retail revenue in 2014-15. Excluding beauty, it expects wholesale revenue at constant exchange rates to be broadly flat in its first half.

It sees beauty wholesale revenue growing by about 25 percent at constant exchange rates in 2014-15, and expects broadly unchanged revenue at constant exchange rates from both Japanese and global product licences. ($1 = 0.5935 British Pounds) (Editing by Kate Holton and Tom Pfeiffer)

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