Burberry has swung back to profit, posting a pre-tax profit of £49 million for the year ending March, a significant recovery from the £66 million pre-tax loss recorded the previous year. The FTSE 100 fashion house hailed this as a "meaningful inflection point" in its turnaround strategy, which has been driven by drastic job cuts and cost-saving initiatives.
Revenue and Earnings
The company met consensus expectations with revenues of £2.4 billion, down two per cent from the prior year. However, the profit recovery fell short of analysts' forecasts of £88 million pre-tax profit. Earnings per share came in at 5.9p, compared to a loss of 20.9p per share last year, but remained below the expected 20p per share.
Cost Savings and Leadership Changes
Burberry secured £80 million in cost savings during the year, with a target of £100 million by its next annual results. The company also announced the retirement of Chair Gerry Murphy, who will be replaced by former investment boss William Jackson in November. New Chief Executive Joshua Schulman, who reversed the brand's short-lived foray into ultra-high fashion, stated, "This financial year marks a meaningful inflection point for Burberry," adding that the brand is "firmly positioned" for long-term growth. However, Schulman acknowledged uncertainty in the macro-economic environment, which could dampen consumer confidence and affect the outlook.
Regional Performance
Regaining traction in China has been a key focus of Schulman's turnaround. Burberry reported four per cent year-on-year sales growth in the region, with growth in Greater China surging as high as 10 per cent year-on-year in the three months to March. Overall, sales grew two per cent year-on-year, with flat growth in Europe, Asia, and the Middle East, but a four per cent jump in the Americas and Asia Pacific. The company opened nine stores and closed 21 in the year, leaving a network of 410 directly operated locations.
Historical Context
Burberry, founded in 1856 by Thomas Burberry in Basingstoke, England, is famed for its macintosh designs. The update comes almost a year after the company announced swingeing cuts to find £60 million in savings, including around 1,700 job cuts and the removal of the entire night shift at its Yorkshire raincoat factory. The fashion house's shares have plunged since their April 2023 peak but have begun to recover. Shares closed up 0.5 per cent to 1,168p on Wednesday.
