Markets and Risks
Evolving
channel mix
Principal
risks
Burberry sells its products to the end consumer through both retail (including digital commerce) and wholesale channels. For 2010/11, retail accounted for 64% of revenue and wholesale 29%. Burberry also has licensing agreements in Japan and globally, leveraging the local and technical expertise of its licence partners.
Revenue by channel
Excluding the results of the discontinued Spanish operations. Underlying is calculated at constant exchange rates.
Retail
Includes 174 mainline stores, 199 concessions within department stores and 44 outlets, as well as digital commerce around the world
- 32% underlying growth (20% excluding impact of China acquisition)
- 11% comparable store growth
- Net 26 mainline store openings in the year, including Beijing, São Paulo and Mumbai
Wholesale
Includes sales to department stores, multi-brand specialty accounts and Travel Retail, as well as sales to its franchisees who operate 56 Burberry stores, mainly in Emerging Markets
- 16% underlying growth (25% excluding impact of China acquisition)
- Strength from Asia Pacific and the Americas, particularly Asia Travel Retail and US department stores
- Entered four new markets with franchise partners (Armenia, Egypt, Israel and Mongolia)
Licensing
Includes royalty income received from Burberry’s licensees in Japan, its global licensees for fragrance, eyewear and timepieces, and a small European childrenswear licensee
- 4% underlying decline
- Growth in global product licences offset by termination of Japanese leather goods licence in 2010 and the final regional menswear licences
- Greater integration between strategy, product development and digital marketing
Effective management of risks is essential to the delivery of the Group’s objectives, the achievement of sustainable shareholder value, the protection of its reputation and meeting corporate governance requirements.
The risks set out below represent the principal risks and uncertainties which may adversely impact the management of the Group and the execution of its growth strategies. The steps the Group takes to address these risks, where they are matters within its control, are also described. Such steps will mitigate but not eliminate risks. Some of the risks relate to external factors which are beyond the Group’s control. The order of the risks is in no way an indication of their relative importance, and each of the risks should be considered independently. If more than one of the events contemplated by the risks set out below occur, it is possible that the combined overall effect of such events may be compounded.
The Board has overall responsibility for ensuring that risks are effectively managed by the Group. The Board has delegated to the Audit Committee responsibility for reviewing the effectiveness of the Group’s system of internal control and risk management methodology. Risks are formally reviewed by the Group Risk Committee which meets at least three times a year. Key business risks are also considered as part of the Group’s strategy development and ongoing business review processes. The risk assessment process has been enhanced during the financial year incorporating best practice identified during a benchmarking review. Please refer to the Corporate Governance section for further details of the Group’s risk management processes and internal controls.
