Burberry sets out growth plan amid falling profits
- FY earnings fall 7% to GBP415.6m (US$607.5m)
- Sales down 1% to GBP2.5bn
- Sets out three-year growth plan
Fashion brand Burberry has announced an ambitious three-year plan to drive revenue growth, improve productivity and deliver at least GBP100m (US$146.2m) of cost savings in the face of falling sales and profits.
The luxury retailer said pre-tax profit was down 7% to GBP415.6m in the 12 months to the end of March, from GBP444.6m a year earlier.
The brand's revenue for the full year was down 1% at GBP2.5bn. Comparable sales were also down 1%, but rose 3% excluding Hong Kong and Macau, where Burberry has had to contend with a collapse in demand for luxury goods.
CEO Christopher Bailey said that while the company expects the "challenging environment" facing the luxury sector to continue in the near term, Burberry is committed to change.
He added: "We are firmly committed to making the changes needed to drive Burberry's future out-performance. We continue to see significant opportunities ahead of us and have put ambitious plans in place to increase future revenue, enhance productivity and create a more efficient organisation."
Bailey said the company's long-term aim is to prioritise the investment needs of the business and ensure regular dividend payments to shareholders, while balancing capital efficiency and flexibility.
Among the moves to create a more efficient retail operation, the company plans GBP100m of cost savings by fiscal 2019. Around half of this is expected to come from significant changes its way of working, such as reducing complexity, simplifying processes and eliminating duplication.
On the product front, this will see the introduction of end-to-end category management for key products from design to retail sell-out, delivering narrower and better balanced assortments with both global consistency and local relevance, it says.
Verdict Retail analyst Andy Hall says Burberry is set to return to "retail basics as it looks to recover from a poor performance in its full-year trading."
He adds: "Burberry has a lot of attributes in its favour which means the collapsed demand from key Asian markets is unlikely to be its undoing. However, with the retailer now re-focusing its efforts on retail (which accounts for 73% of group revenue), it is crucial it continues to make pro-active improvements to the business."
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