ii view: Burberry still confident of sales boom

Making annual sales of over £3 billion and with its shares outperforming the FTSE 100 index in 2023. We assess prospects. 

Full-year results to 1 April

• Revenues up 10% to £3.09 billion
• Adjusted operating profit up 21% to £634 million
• Final dividend of 44.5p per share
• Total dividend for the year up 30% to 61p per share
• New £400 million share buyback programme
• Net debt of £460 million, up from £179 million

Chief executive Jonathan Akeroyd said:

“I am very pleased with what we have achieved this year. We have delivered a strong financial performance, supported by good progress in our core leather goods and outerwear categories, with revenue accelerating in the fourth quarter as growth rebounded in Mainland China.

“While the external environment remains uncertain, I am confident we can achieve our FY24 and medium-term targets as we focus on executing our plan to realise Burberry’s potential as the modern British luxury brand.”

ii round-up:

Started back in 1856, Burberry Group (LSE:BRBY) is today a British luxury brand whose shares are a constituent of the FTSE 100 index. 

Competing against rivals such as LVMH Moet Hennessy Louis Vuitton SE (EURONEXT:MC) and Hermes, Burberry largely sells clothing products including outwear and leather goods. 

Its products are sold on both a retail and wholesale basis, with retail generating around four-fifths of revenues and wholesale providing most of the balance.

Retail outlets as of early April numbered 219 stores, 138 concessions, 56 outlets and 35 franchised stores.

For a round-up of these latest results announced on 18 May, please click here.

ii view:

Burberry has undertaken several transformation programmes in recent years. Current management focus includes simplifying and streamlining key processes to improve efficiency, reburnishing its stores and strengthening distribution. Long term, it holds ambition to reach £5 billion in annual sales, up from just over £3 billion in the financial year just gone. Asia-Pacific including China and Japan generates its biggest slug of sales at around 43%, followed by the Europe, the Middle East, India and Africa at 33% and the Americas the balance at 24%.

For investors, the tough economic backdrop including rising interest rates remains an issue, and costs generally for businesses remain elevated. Sales at its Americas business fell 7% in the final quarter, potentially hit by higher interest rates and the fallout in regional banks, while the relationship between China, a key market for Burberry, and Western nations is increasingly tense.

On the upside, it is likely that wealthier customers remain less impacted by the global cost-of-living crisis affecting so many, and Burberry enjoys a diversity of both product and geographical region. A series of management initiatives continue to be pursued, an end to pandemic restrictions in China is aiding sales, while shareholder returns remain in focus given a new share buyback programme and a forward dividend yield of close to 3%. 

On balance, and while some caution remains sensible, this global luxury retailing giant arguably remains deserving of continued long-term investor support. 

Positives: 

• Product and geographical diversity
• Management initiatives

Negatives:

• Souring Western relations with China
• Currency movements can provide headwinds

The average rating of stock market analysts:

Hold