Burberry has warned that the market for luxury retailers is expected to persist in the coming months even as the UK based brand rolled out a plan to revitalize growth, together with targeting cost cuts of about £100m by 2019.
The group, widely recognized for its trench coats and check print wear has pledged to optimise processes and make the business more straight forward warning that the coming year is still expected to yield low returns as opposed to those anticipated by analysts as it attempts to address weaker demand in places like Hong Kong as well as inflation.
According to the group’s end of year results which were issued alongside the results of an industry reassessment on Wednesday, the group indicated that profit before tax dropped to £415.6m in the period ending March 31 from £444.6m in the preceding year on flat earnings of £2.5bn. The adjusted figures revealed an 8% decline in profits to £421m before tax analysts expected £420m together with an adjusted EPS of 71.5.
The group however suggested a 5% increase in its end year dividend to 37p with an aim of soothing stakeholder fears, having been forced to put up with the company’s dwindling share price over the past year.
Whilst the tough environment for the luxury market is expected to persist in the foreseeable future, CEO Christopher Bailey said the company is determined to implement relevant changes required in steering the firm’s improved performance in the right direction supported by its established brand name.
Additionally, he outlined numerous opportunities that the company anticipates will ensure future boosted returns alongside increased output to build a more efficient organisation. Further, he added that the structure of the business’s investments will allow it to develop its ongoing needs and make regular dividend payments to its stakeholders.
Part of the plans according to the company is to cut back on inefficiencies in its international business and invest the savings into its biggest growth opportunities, one focus being online ecommerce. The reduction in operational costs coupled with improved marketing efficiency is expected to help yield £100m in annualised cost savings.
The company has had a hard time in the past last year in which it saw its shares plummet as much as 35% as it grappled with dwindling demand for its products in its previously popular locations of Hong Kong and Macau.
A good number of businesses that have previously bloomed in Hong Kong have been caught off guard by plunging sales registered by the malls owing to a decline in the number of tourists from China occasioned by the 2014 pro-democracy demonstration.