15th May 2024 10:49
(Alliance News) - Analysts said there is "not much to cheer" about in annual results from Burberry Group PLC on Wednesday, as the company warned trading conditions are likely to remain "challenging."
Shares in the London-based luxury goods retailer lost 4.0% to 1,140.50 pence in London on Wednesday in response. The FTSE 100 stock is down 55% over the past 12 months.
AJ Bell Investment Director Russ Mould pointed out Burberry has been one of "biggest victims of the luxury goods downturn and there are few signs that it is coming out of the other end."
Burberry said pretax profit plummeted 40% to GBP383 million in the financial year that ended March 30 from GBP634 million the year prior.
Adjusted operating profit fell 34% to GBP418 million from GBP634 million. This was at the bottom end of the range of GBP410 million to GBP460 million given by Burberry in January when it lowered guidance.
Back in November, it had guided for adjusted operating profit towards the lower end of the consensus range at that time of GBP552 million to GBP668 million.
Revenue fell at a less severe 3.9% to GBP2.97 billion from GBP3.09 billion a year earlier.
Full-year like-for-like sales were down 1.0%, but had deteriorated as the year progressed. First half growth of 10% was offset by an 8.0% decline in the second half.
In the fourth quarter, like-for-like sales fell 12%, with Asia Pacific down 17% and the Americas down 12%. Mainland China like-for-like sales fell 19% in the fourth quarter.
Burberry left its dividend unchanged at 61.0p per share.
Looking ahead, Burberry said it expects trade in the first half of financial 2025 to "remain challenging".
Citi said while adjusted operating profit was slightly above the low-end of guidance there is not "much to cheer for."
It said the "jury's still out as to whether Daniel Lee's brand aesthetics can lead to stronger commercial success and double-digit growth in a polarised demand environment. Negative sentiment might continue to prevail for turnaround stories over the next six to 12 months."
Burberry in September 2022 named Lee, the former creative director of Italian luxury brand Bottega Veneta, to be its new design chief. Lee replaced Riccardo Tisci.
The broker retained a 'neutral' rating.
AJ Bell's Mould noted margins have fallen and that means profits have "taken a hit" given no growth in sales.
"The wholesale operations haven't done well, costs are going up and Asia has proved to be a problematic region for the group. A slump in sales in China, as well as the Americas, is bad news for Burberry as they are among the most important regions for the group," he explained.
"The fourth quarter was truly miserable and the pressure is now on to find a magic solution," he added.
Mould pointed out Burberry's share price has more than halved over the past 12 months and suggested this could attract the attentions of a buyer.
"If ever there was a chance for another luxury goods firm or private equity to pounce on Burberry while it is on its knees, it's now. It is a screaming takeover target for someone who is able to look beyond current problems and recognise the true value of the brand over the long term," he thinks.
He noted that the UK has developed a reputation for being a pool of "sitting ducks," with companies are being "picked off" one by one.
"For Burberry, it feels like the odds of a takeover are shortening by the day," he remarked.
By Jeremy Cutler, Alliance News reporter
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