Burberry results hit after taking its fragrance deal in-house

By Simon Pitman

- Last updated on GMT

Related tags: Inter parfums, Luxury good

Burberry results hit after taking its fragrance deal in-house
British luxury goods brand Burberry has seen a slump in its revenue and profit for the first quarter of the year, following its decision to end the fragrance license agreement with Inter Parfums.

The company said that the end of the deal and the resulting transition period led to an estimated loss in sales of approximately £83m (€97m), a result that underlines the importance of its fragrance business to the overall group.

But despite the impact, the overall dynamics of the business remain strong, with profits for the quarter up 14 per cent to £428m, and revenues increasing by 8 per cent to reach the £2bn mark.

Burberry forms new beauty division

As a result of ending its fragrance and cosmetics license with Inter Parfums, the company has confirmed that as of April 1, 2013, it now has a fifth business division, which will be known as Burberry Beauty.

In its quarterly financial statement, the company confirmed that it has established a combination of external expertise and external hires to get the business off the ground, while also establishing dedicated supply chain and IT capabilities.

Likewise, it confirmed that it has established growth strategies that are focused specifically on developing its pillar fragrance portfolio, together with the Body and Brit brands.

Inter Parfums turns to other luxury brands

Last July Burberry confirmed that it was buying back the rights to the agreement for €181m ($220m), a sum that has enabled Inter Parfums to reinvest in the acquisition of Alfred Dunhill fragrances.

Last month Burberry revealed that for the quarter ending March 31st​, global sales grew by 29.3 percent to $213.8m, compared to $165.4m in the corresponding period last year – figures that included the last quarter of Burberry sales, its biggest selling brand.

 

However, it is forecast that the business will be impacted in the short- to mid-term given that Burberry sales have traditionally made up approximately 60 percent of Inter Parfums’ annual revenues.

Looking ahead to the rest of the year, the company said that the strong first quarter means it is raising its outlook for the 2013 financial year, from $480m to $520m, although this will be well down on full year 2012 sales of $654m.

Related topics: Business & Financial

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