Burberry has experienced a significant decline in profits, plummeting by 40% over the past year, reflecting a broader slowdown in the demand for luxury goods, particularly in Asia and the Americas. The UK-based upscale fashion retailer disclosed a pre-tax profit of £383 million for the year ending 30th March, a stark contrast to the £634 million recorded in the preceding 12 months. Global sales dipped by 8% in the latter half of the year.
Anticipating a tough first half of the next fiscal year, Burberry plans to strike a balance between investing in consumer-oriented initiatives and maintaining strict cost management. This comes after a profit warning issued in January, citing factors such as the cost of living crisis and increased interest rates. Despite the warning, adjusted operating profit landed at £418 million in the recently released results.
Burberry’s share price took a hit, dropping by 3% in early trading, though it partially recovered to 1.5% down, marking a 53% decline compared to the previous year. Overall sales for the year decreased by 1%, with the second half experiencing a more pronounced decline of 8%, primarily driven by a substantial drop in sales in the Americas and Asia.
Fellow luxury brands like Mulberry and Kering have also reported declines in sales, attributing the trend to a slowdown in luxury spending, particularly in the UK and Asia. Analysts note that Burberry is grappling with defining and elevating its brand identity, resulting in ambiguous messaging and lackluster sales growth.
Jonathan Akeroyd, Burberry’s CEO, acknowledged the challenges posed by the sluggish luxury market but expressed confidence in the company’s strategy to revitalize its brand image and navigate through this challenging period.
