Burberry cuts down on costs as profit slumps

Published:  19 May, 2016

The UK headquartered luxury Group is to save around £100 million (US$146 million) over the next three years after reporting an 8% fall in annual profits.

Burberry’s pre-tax profit dropped to £415.6 million (US$608 million) in the year to March 31, 2016 on flat revenue of £2.5 billion (US$3.66 billion). On an adjusted basis, pre-tax profits were 8% lower than the previous year to £421m (US$616 million), just above analysts' expectations.

The company, which said it is taking measures to foster growth across all divisions, is to adopt a £100 million (US$146 million) annual savings strategy over the next three years involving improved efficiency in marketing and lower operating expenses. The luxury fashion house also announced it also plans to cut down on duplication across its global business and expand its online profile.

“While we expect the challenging environment for the luxury sector to continue in the near term, we are firmly committed to making the changes needed to drive Burberry's future outperformance, underpinned by strong brand and business fundamentals", said Christopher Baily, CEO, Burberry.

However, concerns have been raised regarding the role of Bailey as both the company’s CEO and Head of Design. The company is said to be considering the appointment of a Senior Commercial Manager to help achieve the targets set.

Burberry has increased the FY 2016 dividend by 5%, with a payout ratio of 53% on adjusted EPS, and is to commence a share buyback programme of up to £150 million (US$219 million) as from FY 2017.

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