* Says it will keep creative control, tap Coty's expertise
* Says the deal will boost earnings from 2018/19
* Shares up 1 pct
(Adds CFO comments, analyst reaction, shares)
By Paul Sandle
LONDON, April 3 British luxury brand Burberry
said on Monday it would license its fragrances and
cosmetics to Coty in a deal totalling $225 million that
will help it develop new products and benefit from the U.S.
Known for its British-made trenchcoats, Burberry's beauty
range is led by fragrances My Burberry and Mr Burberry, and
includes cosmetics to help introduce its brand to new consumers.
The company, which brought the perfume business in house in
2013, said it would retain creative control while Coty, which
counts Gucci, Hugo Boss and Calvin Klein in its portfolio, would
bring its global distribution network to the table.
Chief Financial Officer Julie Brown said Burberry had
repositioned the business by cutting secondary-channel sales,
and it was now the time to partner the premium fragrance leader.
"Coty has very broad experience of working closely with
other luxury brands," she said in an interview. "We will benefit
from their deep beauty industry expertise and also their first
Coty will pay 130 million pounds for the long-term licence,
plus about 50 million pounds for inventory and other assets,
Burberry said. It will also pay royalties from October.
Beauty contributed 7 percent of Burberry's revenue in the
first half of its 2016/17 financial year, down 17 percent on the
prior period, partly as a result of the repositioning.
It launched men's fragrance Mr Burberry a year ago and young
British model Iris Law has promoted its cosmetics.
Chief Operating Officer John Smith said there was an
opportunity to grow cosmetics sales, which currently account for
about 8 percent of beauty sales against an industry average of a
"Make-up is a key recruitment tool for a luxury brand, in
that the price points are a lot lower than any other product,"
he said. "As a means of recruiting people into the brand, it's
Shares in Burberry were trading up 1 percent at 1,739 pence.
Analysts at Exane BNP Paribas said they welcomed the choice
of a first class partner to appropriately develop the business.
"In fact, we never liked the idea of Burberry managing its
beauty business directly, as beauty is an FMCG (fast moving
consumer goods) business where you win on the back of global
reach," they said.
Burberry said the deal would be broadly neutral to adjusted
profit before tax in 2017/18 and accretive the following year.
($1 = 0.7999 pounds)
(Reporting by Kate Holton and Paul Sandle; editing by Susan