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Burberry announces financial results

Burberry

Fashion house Burberry reported that its recovery accelerated through the year leading to Q4 FY21 comparable store sales increasing 32% year on year and -5% compared with Q4 FY19, despite an average 16% of stores being closed.

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In Burberry’s next chapter, it will focus on delivering growth whilst continuing to enhance the quality of its business. Taking FY20 as the base year, it is expected that the revenue is to grow at a high single digit percentage compound annual growth rate at FY21 CER in the medium term. This will be underpinned by the continued outperformance of full-price sales. Burberry will continue to strengthen brand equity by exiting markdowns in mainline stores in FY22. This is a headwind against its comparable store sales growth amounting to a mid-single digit percentage in the full year.

In FY22 adjusted operating margin progression will be impacted by operating expense
normalisation and increased investment to accelerate growth, with more meaningful margin accretion thereafter.

Burberry is focused on and continue to invest in its sustainability and social goals by becoming carbon neutral by 2022, championing diversity and inclusion and positively impacting one million people in the communities in which it operates.

FY21 was the third year of the brand’s journey to transform Burberry and anchor its brand firmly in luxury. Against the backdrop of the COVID-19 pandemic, its goal this year was to strengthen its foundations, adapting to the environment and positioning the brand for acceleration and growth.

Despite the onset of the COVID-19 pandemic, which led to a significant reduction in operating hours and an average of 18% of its global store network closed in the financial year, Burberry completed the objectives for the first phase of its strategy, ending FY21 with strong full-price momentum.

Supported by the strong foundations it have built, it adapted swiftly, driving performance through new product launches and inspiring communications and shifted its focus to rebounding economies and digital channels. As a result, Burberry achieved +7% growth in full-price comparable store sales in the year, with double-digit growth across Americas, Korea and Mainland China and good traction across its core strategic categories.

In terms of brand activity, Burberry continued to reinforce its luxury positioning through emotive campaigns and activations and adopted a highly localised approach in every market. Recent examples include the launch of its first locally produced campaign film for Lunar New Year in January. This had an exceptional response from local Chinese consumers and increased the number of new fans to its WeChat page in a single month by ~15x compared to its 2020 monthly average.

In addition, in February and from the start of the new financial year in April respectively, Burberry debuted Riccardo’s first dedicated menswear and womenswear presentations for AW21. These presentations generated an extraordinary amount of conversation on Instagram, with triple- and double-digit growth compared to its SS21 Show, respectively. Similarly in March, Burberry drove further brand heat with the launch of its global campaign to celebrate its SS21 collection which generated social coverage almost double its SS20 campaign. Continuing to build brand momentum, these activations have also attracted new and younger customers to the brand.

The new collections have also resonated strongly, supporting double digit growth in full-price sales to both new and repeat customers. In addition, within full-price, its strategic pillars – leather goods and outerwear – have returned to mid and high single digit growth respectively for FY21. Strong performance in leather goods has been supported by Burberry’s newly established shapes including the Pocket, which was the focus of the first bag campaign and programme of pop-ups earlier in the year, and the Olympia, its newest shape and the focus of its upcoming bag campaign in May.

Across outerwear, the brand have focused on elevating and diversifying its offer. For example, in January Burberry launched Future Archive, a unique capsule reinterpreting outerwear classics from the Burberry archive. By successfully driving the performance of its strategic pillars, it has supported high single digit growth in prices – further demonstrating the strength of its brand.

In terms of distribution, Burberry elevated the brand experience across its full-price channels and leveraged its digital resources to support both offline and online sales. Within Mainline, it continued to invest in upgrading the store portfolio with 11 new openings and 15 closures this year and developed its new store concept, which Burberry will begin to roll out in early FY22.

In addition, Burberry increased its focus on in-person and virtual appointments to mitigate the impact of reduced traffic and drive traction with local customers. This contributed to growth in sales to local clients in most regions. It also leveraged its digital capabilities to bridge online and offline, including scaling its omnichannel journeys (e.g. virtual appointments, virtual client events) as well as pioneering social retail – launching its first social retail store in Shenzhen Bay. The Shenzhen store has provided a testing ground for a number of innovative experiences and concepts that Burberry plans to roll out in the coming year to drive further consumer engagement.

In terms of online, the brand has continued to capture the recent shifts in consumer behaviour through its digital innovations to deliver double digit growth in full-price online sales across all regions, from a strong base.

Burberry maintained its focus on driving positive change and building a more sustainable future through our Responsibility agenda. All of its stores in Mainland China are now carbon neutral and Burberry is on track this year to use 100% renewable electricity and have a carbon neutral footprint across all of its operations globally.

In the next 12 months, every product it makes will have more than one positive environmental or social attribute, achieved by driving improvements at the sourcing and product manufacturing stage. Stretching its ambitions, Burberry now aims to be net-zero across its own operations and extended supply chain by 2040 and will continue to set leading standards for its industry and pioneer innovative solutions to create real system change.

Burberry also made strong progress on its commitment to build a more diverse, equitable and inclusive organisation. Burberry rolled out its global Diversity and Inclusion strategy, with aspirational goals supported by training and global programmes designed to attract and retain diverse talent, foster an open and inclusive culture and drive education and awareness.

During the year, Burberry was the first luxury company to partner with the Business Disability Forum, Investing in Ethnicity, and the Stonewall Diversity Champions Programme, and one of the first in the industry to join The Valuable 500.

Burberry also became signatories of the British Retail Consortium D&I Charter and BBC’s Creative Allies initiative, working collaboratively to achieve progress across the retail and creative industries. To mark International Women’s Day 2021, it continued its support for London Youth and The Prince’s Trust Women Supporting Women initiative, providing resources and development opportunities for young women. The commitment to gender equality was recognised by Burberry’s inclusion in the 2021 Bloomberg Gender-Equality Index, scoring 10 percentage points more than the company average and reflected by a leading position in the latest Hampton-Alexander Review report for women in leadership in the FTSE 100 for the third consecutive year.

Having successfully navigated its transformation and established a strong foundation, Burberry is well-positioned to embark on the next chapter of growth and acceleration. In this phase, it will leverage its unique brand equity to deliver sustainable, high-quality growth and continue to drive positive change.

In terms of revenue, the brand will accelerate growth by focusing on five levers: i) continuing to build brand advocacy and community; ii) focusing on its core luxury categories, outerwear and leather goods; iii) driving its store performance through the roll-out of its new store concept and scaling of new, omnichannel experiences; iv) supercharging online sales by leveraging its leadership in digital; and v) increasing its focus on full-price, including significantly reducing markdown in Mainline by the end of FY22.

This acceleration will support Burberry’s profitability through increased full-price and digital penetration, improved sales density and continued tight cost control. As a result, its ambition in the medium-term is to achieve high-single digit compound revenue growth at FY21 CER on FY20 base– with overperformance in full-price – and meaningful operating margin accretion.

SEE ALSO : Revlon announces financial results

“In the last three years we have transformed our business and built a new Burberry, anchored firmly in luxury. We have revitalised our brand image, renewed our product offer and elevated our customer experience while making further progress on our ambitious social and environmental agenda. In spite of COVID-19, we achieved our objectives for the period and delivered a strong set of results in FY21, ending the year with good full-price sales growth. In this next chapter, supported by these foundations and the strength of our teams, we will accelerate our growth and deliver value creation while continuing to build a more inclusive and sustainable future,” said Marco Gobbetti, Chief Executive Officer.

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