Burberry Group Plc (London) announced a 32.6 percent gain in net profits for the first half of its 2013 fiscal year.
“We remain focused on executing our retail, digital, and marketing strategies in the all-important third quarter and in what remains an uncertain macro environment,” said ceo Angela Ahrendts, who is about to depart for Apple Inc. (Cupertino, Calif.) (She will be replaced by Burberry's chief creative officer Christopher Bailey.)
But the luxury-goods maker said earnings for its new beauty business will be less than half its original forecast (partly because of the increase in marketing spending).
This spring, Burberry discontinued its licensing agreement for branded fragrance and other beauty products and took control in house. It has more than doubled its marketing expenses in the process, including introducing a new women’s fragrance in February.
The company said it expects a “halo” effect from investment in beauty that will boost sales across the group, while forecasting that operating profit margins will probably show a “modest increase” this year.
According to Bloomberg News, one of Bailey’s first major decisions will be whether to move Burberry even further upscale to challenge international luxury brands like Prada and Louis Vuitton, or move downward to target a wider audience with less expensive goods.
“There will be no radical change in strategy,” Bailey told investors. “Existing senior executives will take on additional responsibilities, to enable Christopher to lead the business into the next phase of growth,” Burberry said in a statement.