Burberry profits slump while it revamps business

Burberry’s profits slumped as the fashion house implemented a turnaround plan to cut costs and revamp its products.

For the six months ended 30 September, revenue slipped 4% to £1.15bn compared to last year but was up 5% on a constant currency basis.

The FTSE 100 company, which in May said it was to overhaul its product categories in order to increase revenue, said the growth in revenue was strongest in its stores, particularly in the UK, which offset declines in wholesale and licensing, in part due to its actions to build and reinforce its luxury brand position.

However, adjusted pre-tax profit plunged 24% to £146m, and was down 4% on a constant currency basis, while reported pre-tax profits plunged 34% to £102m.

Diluted earnings per share fell 39% to 16.2p.

At the end of September, the company had £529m net cash, a 15% increase from last year, with outflows including a £69m payment for China and Burberry Middle East non-controlling interests, £43m capital expenditure and £32m from a share buyback.

Chief executive Christopher Bailey said: "In May we outlined plans to evolve how we work as a business and to drive Burberry's future growth in a rapidly-changing luxury environment.

“Since then, we have made good early progress towards realising the significant opportunities ahead of us, as we begin implementing our five strategies. We remain on track to deliver our financial goals."

The company said it was on track to meet at least £100m of annualised cost savings by 2019, which around £20m will be delivered in 2017.

In the 2017 financial year the company expects new space in the retail business to contribute low single-digit percentage growth to retail revenue, while around 15 store openings are planned, with a similar number of closures.

In wholesale, it expects revenue at constant exchange rates in the six months to 31 March 2017 to be down by a mid-teens percentage, with the trends in fashion and beauty similar to those in the first half.