Luxury fashion firm Burberry has said its overhaul is starting to bear fruit as it posted higher annual profits despite falling UK sales as the pound’s bounce-back dented tourist demand.
The group reported a 5% rise in bottom-line pre-tax profits to £413 million for the year to March 31.
Group comparable store sales rose 3%, although it revealed that growth halved in the second half of its financial year, from 4% to 2%.
Recent trading was dragged lower by falling UK sales in the final six months as the group failed to match the previous year’s impressive performance, when sales surged thanks to a spending spree by overseas shoppers taking advantage of the weak pound.
Overall the UK saw a “low single-digit percentage” rise in sales over the year, Burberry said.
Results for the wider group showed a bounce-back after a tough previous year, when profits tumbled by 21% after being hit by weak wholesale trading in the US.
While the task of transforming Burberry is still before us, the first steps we implemented to re-energise our brand are showing promising early signsBurberry chief executive Marco Gobbetti
Burberry chief executive Marco Gobbetti said: “In a year of transition, we are pleased with our performance as we began to execute our strategy.
“While the task of transforming Burberry is still before us, the first steps we implemented to re-energise our brand are showing promising early signs.”
Results showed underlying pre-tax profits lifted 2% to £471 million, or 5% higher with currency effects stripped out.
Mr Gobbetti is slashing costs – targeting £120 million a year in cuts by 2019-20 – and is axing under-performing stores as part of his overhaul.
The store closures are set to see retail sales fall by 1% in the new financial year, although Burberry is expecting “broadly” stable revenues and profit margins.
It cautioned in its latest results that the pound’s recent recovery was set to have a higher-than-expected impact of around £40 million on underlying earnings in the new financial year.
The group had previously benefited from the pound’s slump following the Brexit vote.
Burberry shares rose more than 2% after the full-year results.
Ken Odeluga, a market analyst at City Index, said: “Burberry has given investors further reasons to stay patient, though a 2% rise in full-year profit provides little evidence that chief executive Marco Gobbetti’s suitably expensive strategy is gaining traction.”
In its results, Burberry said it saw “mid-single digit” percentage sales growth across Asia Pacific thanks to stronger tourist spend in the final six months.
But as in the UK, Continental Europe suffered a sales fall as tourist spend eased back.
Its Americas business benefited from a second half return to growth in the US, leaving overall sales for the region rising by a “low single digit” percentage.
The firm closed 20 stores on a net basis over the year, with seven in the last week alone.
Mr Gobbetti unveiled his strategic overhaul last November, with a revamp that will see it focus more on high-end luxury shoppers, shut some wholesale and retail sites and refurbish stores.
Mr Gobbetti took over at the helm last year amid a changeover at the top, with the group having replaced its chairman, chief executive and chief creative officer within the past year.