Yahoo Finance Burberry shares rise on surging sales and plan to open 38 more stores
Burberry (BRBY.L) reported annual profits and revenues were up as the UK trenchcoat maker benefited from efforts to make its brand more exclusive and pricey.
In its first earnings release since Jonathan Akeroyd, the former head of Versace, became CEO in March, it posted a revenue growth to £2.8bn ($3.5bn) from £2.3bn for the year ending 2 April 2022.
Operating profit grew to £543m from £521m, while pre-tax profits lifted 4% to £511m, the British retailer said on Wednesday.
Adjusted operating margin widened to 18.5% during the fiscal year, with the fashion brand maintaining its guidance of high single-digit revenue growth.
However, the luxury goods maker warned its outlook for future trading is dependent on the rate of recovery in China, where COVID has led to more lockdowns.
"Our outlook is dependent on the impact of COVID-19 and rate of recovery in consumer spending in Mainland China," the company said. "While the current macro-economic environment creates some near term uncertainty, we are actively managing the headwind from inflation."
Burberry, known for its camel, red and black check, and TB monogram, announced a £400m share buyback plan this fiscal year as dividends rose 11%.
Shares in the London-listed group climbed 1% after delivering a profit boost from its move upmarket.
Like-for-like store sales increased 18%, with underlying performance driven by full-price sales partially offset by the exit of markdowns in mainline and digital stores.
But comparable store sales growth slowed to 7% in its fourth quarter as COVID lockdowns in China, its biggest market, hit trading in March. Chinese consumers account for £2 in every £5 spent, and full-price sales in mainland China grew over 50% in the 12-months to 2 April.
Business in China declined by about 13% in the last quarter, chief financial and operating officer Julie Brown said on Wednesday during a call with journalists. Currently around 40% of Burberry’s network in the country is impacted with stores closed and e-commerce disrupted.
Brown said she expects a quick and pronounced recovery once the lockdowns end. "It’s an amazing market and we look forward to being able to open the stores there," she said.
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The retailer changed its logo in 2018 and has been updating its stores to create fancier backdrops for its designer clothes. A further 65 locations are expected to be refurbished this year and by the end of the year a quarter of directly-operated Burberry stores will carry the new design.
In 2022, the group opened 38 stores and closed 35 stores, with key openings including three new flagship stores on Sloane Street in London, Rue Saint Honoré in Paris and Plaza 66 in Shanghai.
The luxury goods sector has experienced a V-shaped recovery after the pandemic hammered sales in 2020. Luxury brands, unlike other consumer brands face less restraint by shoppers amid soaring inflation due to affluent customers who are willing to pay higher prices for designer goods.
Recently it has been grappling with renewed lockdowns in China, weak tourism and declines in global stock markets that may lead some luxury shoppers to cut back on spending. Inflation and the rising cost of living could also play a factor.
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Burberry also closed its stores in Russia in March after the Kremlin's invasion of Ukraine and said restrictions in China started weighing on sales during the month. Burberry gets less than 1% of its sales from Russia, Brown said.
The company's continental Europe locations saw a decline and the UK remained challenged with London performance weak given its high tourist exposure.
Akeroyd is expected to follow in the footsteps of predecessor Marco Gobbetti, transforming the 166-year-old group into a higher-end brand by reducing third-party distribution and eliminating discounts on Olympia handbags and tartan scarves.
He said he would set out his plans to build on Gobbetti's foundations and accelerate growth at the interim results in November.
"The company has made great progress over the last five years," the CEO said. "I look forward to setting out my plans for building on these strong foundations."
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