Companies

Burberry launches new strategic plan amid profit losses

Nov 26, 2024 United Kingdom

The British luxury company announced first-half results for fiscal 2025. Declined revenue and profitability prompted a strategic reformulation to revitalise the brand and return to sustainable growth

"My first few months have reaffirmed my belief that Burberry is an extraordinary luxury brand, quintessentially British, equal parts heritage and innovation. Today, we are acting with urgency to course correct, stabilise the business and position Burberry for a return to sustainable, profitable growth", commented Joshua Schulman, Chief Executive Officer at Burberry.

In the 26 weeks that ended on the 26th of September 2024, Burberry reported a 22% decline in revenue for the first half of fiscal 2025, totalling 1.09 billion British pounds (1.31 billion euros), with comparable store sales in retail down by 20%. Wholesale revenue fell 30%, while licensing revenue rose 3%, driven by solid fragrance performance.

Burberry's adjusted operating loss stood at 41 million British pounds (49.2 million euros), impacted by a 33 million British pounds (39.6 million euros) impairment charge and a net 29 million British pounds (34.8 million euros) inventory provision charge. Gross margin decreased to 63.4%, down by 640 basis points compared to the same period last year, reflecting higher product costs and inventory exits.

Cost-control measures yielded 8 million British pounds (9.6 million euros) in savings while operating expenses declined by 3. The adjusted loss before tax was 68 million British pounds (81.6 million euros), compared to 219 million British pounds (262.8 million euros) in profit in the same period last year.

Burberry's store footprint expanded with 19 new openings and 12 closures, maintaining 429 directly operated stores as of September 2024. The brand is aligning distribution channels with customer demand, aiming to increase store productivity while improving product assortment and styling.

Geographical Performance

The Asia Pacific region saw a 25% decrease in comparable store sales in the first half of fiscal 2025, compared to the same period in the previous year, driven by a 24% drop year-over-year in Mainland China. South Korea and South Asia Pacific faced declines of 26% and 38% compared to the last fiscal year, respectively.

In EMEIA, comparable store sales fell by 13% compared to the first half of fiscal 2024. In this region, tourist spending accounted for over half of retail revenue. The Americas recorded a 21% decrease in comparable store sales year-over-year.

Product Performance

In the first half of fiscal 2025, product performance varied across categories. Outerwear and soft goods outperformed the group average across all major regions. Ready-to-wear items performed in line with the overall group average, and leather goods and shoes fell below the group's average performance.

New Strategic Plan

To address challenges, Burberry launched the "Burberry Forward" strategy, focusing on reigniting brand desire and driving long-term value creation. The plan aims to reinforce its authority in outerwear, rebalance its product portfolio and amplify brand codes such as British wit and London imagery.

Burberry is reviving a high-performance culture by underpinning organisational clarity, executional discipline and leveraging data-driven decision-making. With a strong focus on productivity, simplification and financial discipline, the company outlined ambitions to return to 3 billion British pounds (3.6 billion euros) in annual revenue over time.

2025 Outlook

The company remains confident in its strategic plan to enhance performance and create long-term value. However, with the festive trading period approaching and persistent uncertainties in the global macroeconomic environment, it is uncertain whether second-half results will fully counterbalance the adjusted operating loss recorded in the first half of the year.

1 GBP = 1.20 EUR

Image Credits: revistarua.pt

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