Business

Weak sterling helps prop up Burberry profits

Fashion house suffered pretax profit drop of 21% when currencies are stripped out

Cost-cutting plans at Burberry are on track, with £20m of annualised savings achieved in the past year. Photograph: Getty Images

Thu May 18 2017 - 17:32

Burberry, the UK luxury fashion group, managed to scrape an increase in reported profit last year thanks to a sharp fall in sterling.

Sales from Burberry’s own stores, which make up 77 per cent of the total, increased 3 per cent. That was mainly due to the opening of new stores in Asia, although same-store sales also crept up 1 per cent.

However, after stripping out the benefit of currency movements, adjusted profit before tax fell 21 per cent, in line with analysts’ forecasts. Burberry said the figures were pulled down by lower wholesale revenues and the expiry of a brand licensing agreement in Japan.

Shares in Burberry climbed 1.7 per cent to £16.69 after the news on Thursday morning.

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Cost-cutting plans were on track, the company said, with £20 million (€23.3m) of annualised savings achieved in the past year.

Earlier this month Burberry announced it was relocating 300 roles from London to a new back-office operation in Leeds. The move will free up several floors of office space in London's expensive Westminster district. The campus opened in 2009 to an exacting design by chief executive Christopher Bailey as part of a £100 million (€116.8m) efficiency plan aimed at bringing together executives who had previously been scattered around London.

Top job

Unveiling the group's financial results for the last time as chief executive, Mr Bailey said he was looking forward to the arrival of Marco Gobbetti in the top job in July, which would help "elevate and strengthen the brand further and take Burberry to the next level as a global luxury retail and digital business".

Mr Gobbetti was hired from Céline last year to bring business heft to a company that had been criticised for appointing Mr Bailey to the dual role of chief creative officer and chief executive.

The new recruit is spending his first six months working within the luxury brand’s Asia-Pacific business because of contractual commitments that bar him from an immediate start in a more senior job.

Burberry increased its full-year dividend 5 per cent, to 38.9p, and announced a new £300 million (€350.5m) share buyback. The distribution will include cash from Coty's £130 million (€151.9m) franchise deal to take over Burberry's fragrance and beauty business, announced last month. That ended a four-year effort to develop the fragrance business in-house, which last year saw the label launch its "Mr Burberry" fragrance. The scent was described as an "intense interpretation of the original eau de toilette" – "inspired", the company said at the time, by a black trenchcoat. – Copyright The Financial Times Limited 2017

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