Burberry has been struggling as consumer demand has waned.
The company posted a 4% preliminary revenue drop for fiscal 2024 in May alongside and a 34% drop in adjusted operating profits. Prior to that, Burberry issued an early profit warning in January and posted an 18% profit dip for H1 in November 2023.
Wider challenges in luxury fashion have also impacted competitors including Aeffe, Ferragamo and Kering, which have all seen earnings declines. However, other companies such as Prada and Zegna are flourishing, indicating an unevenness in the sector.
“Our Q1 FY25 performance is disappointing,” Gerry Murphy, chair of Burberry, said in the release. “We moved quickly with our creative transition in a luxury market that is proving more challenging than expected. The weakness we highlighted coming into FY25 has deepened and if the current trend persists through our Q2, we expect to report an operating loss for our first half.”
Murphy added that the company had decided to suspend dividend payments in respect of FY25, and said Burberry was “taking decisive action to rebalance our offer to be more familiar to Burberry’s core customers whilst delivering relevant newness.”
“We expect the actions we are taking, including cost savings, to start to deliver an improvement in our second half and to strengthen our competitive position and underpin long-term growth.” Murphy said.
By region, comparable store sales in Asia Pacific fell 23%, led by a 38% decline in South Asia Pacific, per the release. China fell 21%, while South Korea dropped 26%. Japan, which has been seeing a recent increase in overall luxury sales, was up 6%. Comparable store sales in the Americas decreased 23%, while sales in EMEIA were down 16%.
Looking ahead, the company said in its earnings report that it expected the trading slowdown it experienced in Q1 FY25 to last into July.
“As we navigate this period, we have decided to suspend dividend payments in respect of FY25 in order to maintain a strong balance sheet and our capacity to invest in Burberry’s long term growth,” the company said.
Wholesale revenue is expected to “decline by around 25% in H1 and decline by around 30% for the full year,” per the company.
“If this trend were to continue through the current quarter, we would expect to report a H1 FY25 operating loss and FY25 operating profit to be below current consensus,” the company stated.
