Burberry PLC’s (LON:BRBY) revealed that its profits for the 52 weeks ended March 28, 2020, tumbled as the luxury goods group took a £245mln stock and stores writedown amid disruption in its key Asian markets.
The raincoat, bags and clothing maker also said it is also not able to give guidance for the current financial year due to disruption caused by the coronavirus (COVID-19) pandemic.
The final dividend has already been scrapped, and future payments are to be reviewed at the end of this financial year, the FTSE 100-listed group said.
Around 50% of its stores remain closed, Burberry added, and the first quarter to end June will be severely impacted though there are signs of recovery in mainland China and Korea. Cumulative sales in both markets since the beginning of April were ahead of the prior year, it added.
Burberry noted that online sales have picked up strongly and it has also seen a strong response to its most recent collections.
“We have taken swift action to mitigate the financial impact on our business, while prioritising the safety and wellbeing of our teams and customers,” Marco Gobetti, Burberry chief executive said in the results statement.
“We have a strong balance sheet and liquidity, with space for investment when markets recover,” he added.
Revenues in the year to March 28 fell by 3% to £2.63bn though in the final three months of the year store sales declined by 27% and full-year comparable-store sales fell by 3%. Underlying profits were flat at £433mln but dropped 62% to £169mln including the stock write-offs.
Burberry shares rose 5% to 1,447.5p by noon on Friday.
Analysts at UBS said the final results were slightly ahead of the company's pre-release, with fourth-quarter LFL sales down 27% compared to expectations of a 31% decline.
Second-half underlying profit of £230mln versus a consensus £164mln, though UBS noted that this included a £244mln one-off charge and so on a reported basis the second half was actually loss making.
Helal Miah, analyst at The Share Centre, said: “It has been a turbulent year for Burberry mainly due to external factors. While it handled the disturbances from the Hong Kong protests well, there was no way of skipping around the Covid-19 outbreak.
“Despite a dividend cut, investors have now priced this in as now the norm and some encouragement will be taken from the most recent update on trading activity in the Far East where April sales are ahead of the prior year.
“However, Burberry is naturally cautious about the upcoming year; half of its stores are currently closed so 2021 will have got off to a bad start, which is where its digital platform becomes ever more important.
“Although little has been said about how online sales have been doing, there is also the view the travelling consumer, who is a key demographic, may take longer to resume spending. At times of economic strife, luxury spending by the mass affluent is likely to be something to be given up and the unrest in Hong Kong flaring up again, these factors lead to us be on the whole fairly cautious about investing in Burberry.”