Burberry’s profits fall, but Chinese rally offers hope to luxury goods sector

However, CEO Marco Gobbetti said Burberry
BRBY
+ 2.58%
He was encouraged by the “strong rebound” in parts of Asia and was well prepared to navigate through this period by presenting the annual results for Burberry.

But he warned that part of the rebound in China had likely benefited from some repatriation fees, as Chinese customers were no longer able to travel to buy abroad. “As a result, it may take time for the luxury industry to return to its pre-crisis level,” said Gobbetti.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said that Burberry was very exposed to traveling consumers and that tourists from Asia were an important part of sales history in other regions. “It will take a while for tourism to go into full swing, so this will continue to be an obstacle to performance,” he said.

Burberry sales for the year fell 3% to £ 2.63 billion from £ 2.72 billion for the same period last year. The company said it took a charge of £ 157 million on the value of its store assets and another charge of £ 68 million on the value of inventory.

Friday, Burberry shares traded 2% to 1403 pence in early London.

FTSE-listed company known for its distinctive plaid coats and scarves said it expected the first quarter until the end of June 2020 to be “severely affected”, with store closings likely at its peak during most of the quarter. The group currently has 50% of its store network closed.

“The severity of the pandemic was surprisingly affected by revenues, where comparable store sales fell 27% in the fourth quarter, with 60% of stores closing in late March, which contrasts sharply with the previous nine months. when the number increased. 4% Pre-tax profit is very low, although profit remained reasonably good and in line with expectations, “said Richard Hunter, director of markets for Interactive Investor.

Burberry said that, given the current uncertainty, it could not declare a final dividend and would consider future payments to shareholders at the end of its 2021 fiscal year.

Gobbetti said Burberry was making great strides in its brand repositioning strategy, with sales exceeding expectations before the pandemic. The group said it is trying to find new ways to connect with consumers by increasing its digital presence.

Burberry’s free cash flow fell sharply to £ 66 million from £ 310 million the year before. However, the group, which has taken measures to control costs and protect its financial situation, in particular by renegotiating rentals, restricting travel and reducing discretionary spending, has cash of £ 887 million on the balance sheet , including 300 million from a reduction in the revolving credit line in March 2020.

“We have a solid balance sheet and liquidity, with an investment margin when the markets recover,” said Gobbetti.

The fashion group has mobilized its resources to support relief efforts for the pandemic. In April, Burberry reorganized its Yorkshire factory to manufacture surgical gowns and masks throughout its global supply chain. To date, she has donated 150,000 pieces of personal protective equipment to the National Health Service and charitable organizations.

Lily:Burberry shifts from fashionable raincoats to life dresses in key factory as bosses cut wages by 20%

The retailer said it had funded research for a coronavirus vaccine developed by the University of Oxford.