Covid-19: Burberry annual profit slumps despite pre-virus progress

Luxury fashion brand and retailer Burberry has reported today (22 May) that its annual pre-tax profit fell by 62% year-on-year to £169 million, as Covid-19 held back its global business.

In a preliminary results statement, Burberry said it has made progress in its evolution to selling more leather goods and accessories under new creative director Riccardo Tisci, as well as changes in distribution and brand image. But the 4% like-for-like retail sales growth for the first three-quarters of the financial year was thrown off course by the coronavirus in the fourth quarter, with full-year retail sales to 28 March 2020 down by 3%.

Total revenue including the company’s wholesale and licensing channels declined by 4%, largely due to a 27% drop in sales in the final quarter.

Many of Burberry’s Chinese stores temporarily closed in Q4 due to the pandemic, and all shops in EMEIA and the Americas were closed by the end of March in line with government guidelines. Around half of its global store network remains closed for now.

Outside of Asia, Burberry said only its American and UK logistics hubs remained opened – at reduced hours – to service its digital business. 

The business did not break out eCommerce sales results, but it reported a positive digital response to its Chinese New Year campaign. And after Covid-19-related restrictions were lifted in Mainland China in mid-March, it live streamed an event on Alibaba marketplace Tmall which attracted almost 1.4 million social media viewers.

The event involved influencer Yvonne Ching browsing the Burberry Shanghai Flagship store, and is part of the business’s previously stated plan to further build its brand in China.

Sofie Willmott, lead retail analyst at GlobalData, a business intelligence group, said: “Other luxury retailers pale in comparison to Burberry when it comes to their digital presence and the brand’s commitment to the online channel will help to weather the coronavirus storm.”

Today’s results statement also showed that the migration of the brand’s functional support to Burberry Business Services in Leeds and recent investments in an SAP financial platform produced incremental cost savings of £20 million this year.

It said the move has brought cumulative total cost savings to £125 million, and it has accelerated plans to complete the platform upgrade by the end of the next financial year, which is expected to bring £140 million of cumulative savings by that time.