Underlying profits tumble at Burberry despite Brexit boost
Luxury fashion firm Burberry has revealed underlying annual profits tumbled by more than a fifth, but saw the Brexit-hit pound boost sales in a "year of transition".
The group said underlying pre-tax profits plunged 21% to £462 million as it was hit by weak wholesale trading in the US.
But including the fillip from the weak pound since the Brexit vote, underlying profits lifted 10%, while Burberry cheered ongoing "exceptional" sales in the UK thanks to the boom in spend on luxury goods from tourists.
The group cautioned the benefit from the pound would begin to fade later this year, which will hit hit profits in the new financial year by around £30 million.
Outgoing chief executive Christopher Bailey said: "2017 was a year of transition for Burberry in a fast-changing luxury market.
"The actions we have taken to lay the foundations for future growth are yielding early benefits and I remain confident that these will build over time."
The full-year results outline the challenges facing new boss Marco Gobbetti, who takes on the top role in July, when Mr Bailey will step aside to become president and chief creative officer.
Burberry said the weak pound flattered full-year revenues, up 10% at £2.8 billion, but sales fell 2% at constant exchange rates.
Store sales - which make up 77% of revenues - rose 1% on a like-for-like basis after a 3% rise in the final six months, with the UK leading a double-digit sales hike across the Europe, Middle East, India and Africa region.
But underlying wholesale turnover dropped 14% and licensing sales slumped 48%.
This was offset in part by efforts to slash costs across the group.
Burberry has been leading a turnaround plan that has included simplifying the product line, revamping its digital store and cutting costs.
It has also moved to license out its beauty range as part of a new partnership with make-up brand Coty.
The group said earlier this month it would relocate 300 jobs from its London offices to a new site in Leeds as part of cost-saving measures.
Staff at its London headquarters have begun a consultation where they will be offered the chance to move to the North or face the prospect of redundancy.
The move is part of a plan that aims to deliver at least £100 million in cost savings by 2019.
However, Burberry's plans for a flagship manufacturing and weaving facility in Leeds remain on hold.
Burberry's chief finance officer Julie Brown could not say if the planned Leeds manufacturing site would be scrapped.
She said: "It's a very important decision for Burberry. It's too early to say.
"Clearly we have had a number of management transitions and we have a new chief executive starting in July.
"We are considering the implications for Brexit."
It is thought incoming boss Mr Gobbetti will make the final decision on the plans.
Burberry shares lifted 2% after its results.