Burberry swings back to profit after cost-cutting regime
Burberry has returned to profit as it hails a “meaningful inflection point” in its turnaround, following drastic job cuts and savings drives.
The FTSE 100 fashion house took £49m in pre-tax profit in the year to March, marking a recovery from its £66m pre-tax loss in the year prior.
The brand has pivoted towards “timeless British luxury” through its “Burberry forward” campaign in recent years, as new chief executive Joshua Schulman reverses a short-lived foray into ultra-high fashion.
Burberry met consensus expectations with £2.4bn in revenues, down two per cent from last year, while its recovery from a loss was not enough to meet analysts’ £88m pre-tax forecasts.
Burberry’s share price dropped by as much as six per cent on Thursday’s market open, falling to 1,090p.
In the last year, the blue-chip firm said it had secured £80m in cost savings during, with a target of £100m by its next annual results.
Burberry chair retires
The firm notched 5.9p earnings per share, from a 20.9p loss per share last year, but this remained below 20p per share earning expectations.
“This financial year marks a meaningful inflection point for Burberry,” Schulman said, claiming Burberry is “firmly positioned” for long-term growth.
But the chief executive did say he is “mindful of the uncertain macro-economic environment,” and Burberry’s accounts suggested that this context – and its potential to dampen consumer confidence – could undermine its outlook.
The fashion house announced on Thursday the retirement of chair Gerry Murphy, who will be replaced by former investment boss William Jackson in November.
Growth boost in China
Regaining traction in China had been a huge battle as part of Schulman’s turnaround of the fashion house, and Burberry hailed four per cent year on year sales growth in the region.
Growth in the Greater China region surged as high as 10 per cent year on year in the three months to March.
Burberry notched two per cent sales growth overall in the year to March, while growth was flat in Europe, Asia and the Middle East. But the firm saw sales jump four per cent in the Americas and Asia Pacific overall.
The fashion house said it opened nine stores and shut 21 in the year to March, leaving it with a network of 410 directly operated locations.
Burberry’s update comes almost a year to the day after it announced swingeing cuts in a bid to find £60m in savings. The luxury brand responded to its £66m loss with around 1,700 job cuts and a plan to remove the entire night shift at its Yorkshire raincoat factory.
Robyn Duffy, an analyst at audit firm RSM UK, said the firm’s bet on Britishness is paying off.
“In the context of a luxury sector that has endured two difficult years globally, modest growth following last year’s sharp decline still marks a notable improvement in trajectory for Burberry and suggests the early stages of a recovery may now be emerging,” she said.
Burberry was founded in 1856 by then-21-year-old Thomas Burberry in Basingstoke, England, and is famed for its macintosh designs.