Burberry has blamed a global slowdown in demand for luxury goods for a sharp dip in profits and spiralling debts into the billions, as wealthy shoppers tightened their belts after rises in the cost of living.
The iconic fashion brand saw its pre-tax profit tumble by 40% last year, closing at £383million for the year ending March 30, with underlying earnings also down by 34%. In the American markets, Burberry experienced a notable 12% decrease in store sales, facing what it describes as "a relatively broad-based decline" among retail customers.
Burberry warned that the “challenging” environment would continue over the coming months, and that it had picked out cost saving measures to help it combat the impact of inflation. Chief executive Jonathan Akeroyd said savings would come from “operational efficiencies”, but ruled out upcoming store closures.
While store sales in Europe, the Middle East, and Africa initially rose by 4% over the full year, they fell by 3% in the first three months of this year. The region initially benefited from an increase in tourism but later faced challenges due to a dip in local consumer spending, which dropped below double digits in the fourth quarter.
Asia showed strong sales earlier in the year but saw a sharp 17% decline in the fourth quarter, particularly in mainland China where demand significantly weakened. To counterbalance these declines, Burberry has increasingly leaned on its wholesale business, which has helped keep revenue relatively steady with only a 4% annual decrease, totalling £2.97billion.
Ronaldo jets off to Saudi Arabia as unveiling plans for transfer confirmed
However, analysts have expressed concerns that this heavy reliance on wholesale might be tarnishing the brand's image. In response, Burberry's chief executive Jonathan Akeroyd announced efforts to "refocus" the brand's image, reporting "good progress" in this initiative today.
He announced: "Executing our plan against a backdrop of slowing luxury demand has been challenging. While our FY24 financial results under-performed our original expectations, we have made good progress refocusing our brand image, evolving our product and strengthening distribution while delivering operational improvements."
"We are using what we have learned over the past year to fine tune our approach, while adapting to the external environment. We remain confident in our strategy to realise Burberry's potential as the modern British luxury brand and in our ability to successfully navigate this period."
Mr Akeroyd blamed the slump on the government’s decision to abolish tax-free shopping for tourists post-pandemic. The perk had allowed tourists from outside the EU to claim back their VAT on goods bought in the UK, making them 20 per cent cheaper. The chief executive said: “London is losing out to Paris and Milan and the gap is widening.”
Burberry advised that the "challenging" environment will persist in the coming months, while already identifying cost-saving mechanisms that would mitigate the impacts of inflation. Burberry projected its wholesale revenue would drop by roughly 25% in the six months up to September as it enhances control over distribution networks.
The company also stressed that fluctuations in foreign exchange rates could create financial headwinds with predictions of approximately £30million reduction in revenue and a £20million cut in profit for the next fiscal year.
Read more similar news:
Comments:
comments powered by Disqus
