Yahoo Finanzas Burberry Raincoats, Scarves Flew Off Shelves in Fiscal 2024, but Not the Ready-to-wear
LONDON — Cold winds are whipping through luxury, so it’s no surprise that Burberry’s biggest sellers last year were weatherproof classics: scarves, outerwear, and the brand’s signature raincoats.
But those sales were not enough to bolster growth in fiscal 2024. Burberry reported a 4 percent decline in revenue to 2.97 billion pounds, with adjusted operating profit falling 34 percent to 418 million pounds following a downgrade by the company in January.
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At constant exchange, revenue was flat in the 12-month period ended March 30, while adjusted operating profit was down 25 percent as Chinese and American customers in particular held back on spending.
It wasn’t all downbeat. Burberry beat Jefferies’ expectations on revenue and adjusted operating profit. The bank had forecast 2.95 billion pounds, and 407 million pounds, respectively.
RBC Capital Markets said Burberry’s adjusted EBIT was 3 percent higher than consensus, reflecting the brand’s “tight cost control.” Meanwhile, Burberry’s revenue and adjusted operating profit figures beat Barclays’ forecast by 1 percent, and 3 percent, respectively.
Jonathan Akeroyd, Burberry’s chief executive officer, acknowledged the full-year financial results did not meet the brand’s original expectations. The company had already warned the markets in January that adjusted operating profit would fall between 410 million pounds and 460 million pounds, lower than previously expected.
Akeroyd added that Burberry made “good progress” on other fronts in 2024, refocusing the brand image, evolving the product, strengthening distribution, and delivering operational improvements.
Looking ahead, he said “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 realize Burberry’s potential, and we are setting ourselves up for future growth.”
The markets weren’t as upbeat, with the share price closing down more than 6 percent at 11.17 pounds on Wednesday.
Burberry is fighting battles on multiple fronts, trying to build the brand and cement it in the luxury space at a time when the Chinese and Americans in particular are in no mood to spend.
Akeroyd and his team continue to work toward a revenue target of 4 billion pounds in the medium term, and he’s confident they’ll get there eventually.
The company said the tough times will persist through the first half of fiscal 2025, which ends in September. Wholesale revenue, Burberry added, is estimated to fall by around 25 percent in the first six months of the current year.
The year is off to a rocky start. During a call Wednesday morning, Akeroyd described the month of April as “challenging,” but said the comparatives with the previous period will get easier as the year progresses, while the company will be able to reap rewards from its cost savings program.
Burberry is also planning some changes on the fashion front, shuffling its shop floor offer to include a better balance of runway and classic silhouettes. It also plans to build in more opening price merchandise, and promote new handbag families such as the Knight and Rocking Horse.
Clothing and accessories sales were uneven over the past 12 months.
Outerwear grew by a high single digit percentage in the year, led by Heritage rainwear. Scarves grew by a double-digit percentage, and leather goods performed “broadly in line” with the group average, said Burberry.
By contrast, men’s and women’s ready-to-wear underperformed in fiscal 2024. Burberry said sales were “below the group average,” declining by a mid-single digit percentage in the year.
Revenue in all the main product categories – accessories, women’s and men’s – was down in the single digits at reported exchange. At constant rates, accessories fell by 2 percent, while women’s rose 4 percent, and men’s 1 percent.
Much like Sabato De Sarno, his counterpart at Gucci, Burberry’s creative director Daniel Lee is under pressure to deliver. But whipping up bestsellers when aspirational customers are in the mood to save rather than spend, and with quiet, logo-free luxury still the rage, is no easy endeavor.
Still, the clock is ticking.
On Wednesday, Luca Solca wrote that Burberry’s success “depends on the product and its creative director to generate the heat needed to elevate the brand. Currently, this appears to be lacking, given the avalanche of promotions, reduced wholesale orders, and material outlet exposure, but perceptions can change.”
Citi’s Thomas Chauvet said “the jury’s still out” as to whether Lee’s brand aesthetics can lead to stronger commercial success and double-digit growth, “in a polarized demand environment.”
Chauvet believes that negative sentiment might continue to prevail for “turnaround” stories, such as Gucci and Burberry, over the next six to 12 months.
As reported last month, fellow fashion player Kering said it expected operating profit in the first half to plummet by 40 to 45 percent amid a drop in sales at its star brand Gucci, which is undergoing a revamp under CEO Jean-François Palus, deputy CEO Stefano Cantino, and De Sarno.
The fourth quarter was particularly brutal for Burberry, with comparable store sales in mainland China falling 19 percent. Sales from the overall mainland Chinese consumer group were down 12 percent in the final three months, year-on-year.
Overall, Asia Pacific comparable store sales grew 3 percent in the fiscal year, while in the fourth quarter they were down 17 percent due to tough comparatives with last year.
In the Americas, comparable store sales fell 12 percent in the year and in the fourth quarter. Burberry said it is continuing to see a “relatively broad-based decline” across its local customer base.
The EMEIA region, which includes Europe, saw strong tourist growth, with comparable store sales up 4 percent in the full year despite a 3 percent decline in the fourth quarter.
Akeroyd is looking past the current macro challenges, and is eager to make more changes in the coming months.
“The great thing is we’re now live in terms of the execution, [Daniel’s] product is in our channels, and it’s very easy to get a better read, and to adapt things as we go along. The offer has been transformed and is evolving quite nicely, and we’re still adapting it and changing it. It’s all quite positive,” he said.
He added that Burberry has recently refreshed “a lot of our core, carryover product, and we’ve seen some good early signs of positive reactions to that, as well as an improved quality.”
Akeroyd said Burberry has also gained a “stronger share” of accessories sales in the U.S., where the company has recently refurbished 20 stores. Accessories have been selling well in China, too.
In China “there is a good, strong awareness of Burberry, and of Daniel as a talent, especially on accessories,” said Akeroyd.
“Sales of Daniel’s accessories in China have outpaced the sales of accessories in the rest of the world. And we see this growing week on week, which is positive. British heritage continues to be a position of strength there,” he added.
The brand plans to push even harder on accessories, with a campaign for Lee’s Knight and Rocking Horse bags set to break in the next two weeks.
In the meantime, the store refurbishment program continues. Akeroyd said that more than 50 percent of Burberry stores having been updated with the new design concept.
Burberry, like most of its luxury peers, is toughing it out, and hoping that growth will return soon. It’s clear everyone wants this sluggish period in luxury to end – pronto.
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