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Burberry earnings beat estimates, with cost-cutting on track

Thursday, May 18, 2017 - 16:09

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Burberry Group Plc's earnings beat estimates as cost-cutting and improving consumer trends in China shored up the U.K. trenchcoat maker's performance as it prepares for the arrival of a new chief executive officer.

[PARIS] Burberry Group Plc's earnings beat estimates as cost-cutting and improving consumer trends in China shored up the U.K. trenchcoat maker's performance as it prepares for the arrival of a new chief executive officer.

Adjusted pretax profit of £462.4 million (S$833.6 million) for the fiscal year ended March 31 exceeded the average analyst estimate of 457.1 million pounds, Burberry said Thursday, sending the shares up as much as 2.4 per cent. The earnings were down 21 per cent from a year earlier on an underlying basis as the company pumped money into reviving growth in its beauty and wholesale businesses.

Burberry said it's on track toward a goal of cutting costs by £100 million a year by 2019. Cost reductions were partly offset by falling sales in the Americas, where the company has withdrawn from some retail outlets in non-premium locations and shortened its clearance period in an effort to make the brand more aspirational.

Luxury groups including LVMH and Gucci owner Kering SA have reported faster-than-expected growth in the first quarter amid a global rebound in demand for high-end products. Incoming Burberry CEO Marco Gobbetti will face pressure to secure a larger share of that growth for Burberry when he starts the job in July.

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Burberry retail revenues rose 2 per cent on a comparable basis in the quarter ended March 31, the London-based company said last month, compared with a 15 per cent jump in sales of fashion and leather goods at LVMH.

The UK company said accessories outperformed apparel over the fiscal year. In mainland China, sales growth accelerated in the latest quarter, rising to double-digit percentages from single digits earlier in the year, Burberry said.

The company got a boost from the weakness of the pound in the wake of the UK's vote to leave the European Union, with revenue rising 10 per cent in the latest year at prevailing exchange rates, despite a 2 per cent underlying drop.

Cash from a licensing deal with Coty Inc to produce Burberry beauty products, announced in April, will partly fund a new share buyback of £300 million to be completed in 2018, the company said. Burberry increased its dividend for the fiscal year by 5 per cent.

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