Burberry: H1 pre-tax profit grows 26 percent, new CEO announces growth strategy

Announcing its interim results for the first half year, Burberry said, revenue in the period increased 4 percent underlying and 9 percent reported to 1,263 million pounds (1,659 million dollars), with retail comp store sales up 4 percent. The company’s adjusted operating margin rose 210bps to 14.6 percent, while profit before tax increased 26 percent to 128 million pounds (168 million dollars). Meanwhile, the company's new CEO Marco Gobbetti also announced a strategy to achieve long-term growth.

“I am pleased with our performance in the half with strong double-digit underlying profit growth. Consumers responded positively to fashion and newness, particularly in rainwear and leather goods. Digital revenue grew in all regions, led by mobile, while growth was strongest in our own stores in Asia Pacific. I look forward to building on our strong foundations as we implement our strategy to drive Burberry forward,” commented Marco Gobbetti, Burberry’s Chief Executive Officer in a media statement.

Burberry witnesses strong sales and profit growth

The company said, fashion and newness resonated well with the customers, with strength in rainwear and leather goods. Conversion improved in all regions led by returning top spending customers and revenue rise in direct-to-consumer. Digital revenue grew in all regions led by growth of mobile.

Adjusted operating profit increased 17 percent underlying and 28 percent reported to 185 million pounds (243 million dollars). Reported operating profit increased 24 percent to 127 million pounds (166 million dollars). Adjusted diluted EPS was up 32 percent to 32.3p, while diluted EPS also increased 32 percent to 21.4 p.

Burberry added that its financial ambition is to deliver high-single digit revenue growth coupled with meaningful operating margin expansion. The company expects to remain strongly cash generative, committed to its progressive dividend policy and expects to continue to provide additional shareholder distributions in-line with the capital allocation framework. The company announced a dividend of 11p, a growth of 5 percent over the same period last year.

Burberry announces growth strategy

As a part of its strategy to achieve further sales and profit growth, Burberry will put product at the centre of our communication, leveraging its extensive digital reach to convey new energy. To ensure that the distribution is consistent with brand positioning, the company has decided to rationalise non-luxury wholesale and retail doors, with an initial emphasis on the US and then EMEIA. The plan includes refurbishing of stores and enhancing luxury service. The company expects that there will be a period of transition as it implements the new strategy.

"Now is the right time for Burberry to implement the next phase of its transformation. We have the foundations to build on and the team to execute our plans. This will enable us to drive sustainable growth and higher margins over time, whilst continuing to deliver attractive returns to shareholders," added Gobbetti.

For fiscal years 2019 and 2020, Burberry expects revenue and adjusted operating margin to be broadly stable year-on-year at constant exchange rates, reflecting the accelerated delivery of the full 100 million pound cumulative cost savings in FY 2019 and 120 million pounds cumulative annualised cost savings in FY 202, offset by investment and the rationalisation of non-luxury points of sale.

The company added that revenue and adjusted operating profit are expected to grow in FY 2021, with revenue growth accelerating and meaningful operating margin improvement thereafter. Adjusted EPS is expected to grow ahead of adjusted operating profit benefiting from an improvement in the tax rate and additional shareholder distributions.

Picture:Burberry website

 

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