Burberry’s preliminary results for FY25 on Wednesday were even more closely watched than usual. Not only are observers keen to see whether the luxury British business can bounce back from the wider luxury downturn but also specifically whether its new ‘back to the essentials’ strategy under CEO Joshua Schulman is yielding results.
Of course, a strategy’s success or failure is about more than one set of numbers and can take time to work its way through to the accounts statement.
But that issue aside, it did seem to be making some progress in Q4, although the pain is still not over. And for up to 1,700 staff members who could lose their jobs in a new cost-savings and efficiency programme, that pain will be very real (more of that later).
So let’s look at the year to the end of March, which despite some negative numbers beat expectations.
Schulman said that “after a challenging first half, we have moved at pace to implement Burberry Forward, our strategic plan to reignite brand desire [and] improve our performance. Our customers are responding. With improvement in brand sentiment, we will be ramping up the frequency and reach of our campaigns. Continued resilience of outerwear and scarf categories reaffirms my belief that we have the most opportunity where we have the most authenticity. I am more optimistic than ever that Burberry’s best days are ahead.”
Admittedly, revenue growth and robust profitability might still be some way off. In the latest year, revenue fell 17% on a reported basis and 15% at constant exchange rates (CER) to £2.461 billion. And comparable retail store sales fell 12%, a much sharper drop than the 1% fall a year ago.
Adjusted operating profit plummeted to £26 million from £418 million and the adjusted operating margin was just 1%, down from 14.1%. But while the H1 adjusted operating loss was £41 million, in H2 it made an adjusted operating profit of £67 million.
Meanwhile, the full-year reported operating loss was £3 million, a sharp swing from a £418 million operating profit in the previous financial year.
Comp sales and product in focus
Digging more deeply into the comparable sales figure that it provided, the company said that while the full year fall was 12%, for Q4 it was only 6%.
It saw a full-year 16% drop in Asia Pacific but it narrowed to a 9% drop in Q4. Mainland China fell 15% in the year and 8% in Q4. South Korea fell 18% in the year and 11% in Q4 and Japan remained in growth, up 1% in the year and 4% in Q4, boosted by tourist spend mainly from Chinese customers. South Asia Pacific declined 28% in the year and 16% in Q4.
Burberry saw an 8% comp sales drop in EMEIA and a 9% fall in the Americas for the year. But in both regions, the Q4 decline was only 4%, suggesting they’re at least on the road back towards comparable sales growth. Within EMEIA, growth from local customers partially offset a decline in tourist spending in Q4. Business in its UK home market “continues to be seriously impacted by the withdrawal of VAT refunds for overseas visitors in 2021, which has made the UK the least competitive destination in Europe for tourist shopping”.
By product, outerwear and scarves continued to outperform in the year and Q4. RTW performed broadly in line with the group average but leather goods lagged the group average. Its previous attempt to boost its leather accessories business has turned into something of a nightmare and it’s clear that issues remaining in this area.
Meanwhile, wholesale revenue declined 35% at CER and 37% at reported rates in FY25 as a result of a strategic review of its partners, as well as the challenging consumer demand environment.
Strategy and job cuts
It all broadly gives weight to Schulman’s view that the company is on the right track with its current strategy. The Burberry Forward reset wasn’t launched until part-way through Q3.
When it did launch, it saw major change put in place. The company reset its “brand expression to Timeless British Luxury” with 360-degree ‘It’s Always Burberry Weather outerwear and ‘Wrapped in Burberry’ festive and Lunar New Year campaigns.
It presented the Winter 25 runway show at Tate Britain that celebrated its “iconic brand codes and our hero categories, resulting in a significant improvement in brand sentiment and engagement”.
And it initiated a “rebalancing” of the product offer “with fewer, bigger ideas” and “aligned pricing with category authority in a luxury context”. The company also enhanced VM in stores with more mannequins and improved product densities, as well as launching a scarf bar pilot.
It also updated styling online, introducing new digital innovations to “broaden appeal, delivering a step change in performance”.
Additionally, the brand strengthened alignment between its commercial and creative teams and “evolved” its operating model “to drive simplification, increase agility and improve productivity”.
Of course, in any reset, it’s not easy to draw a line under the old strategy but the company said it accelerated actions to address its inventory overhang and “restore scarcity” resulting in gross inventory of -7% CER as of March 2025, ahead of guidance.
It also initiated a cost savings programme with £24 million delivered in FY25. As part of this ongoing commitment, on Wednesday said it was “announcing organisational changes aimed at enhancing collaboration across our business, increasing our agility, driving efficiency and profitability while protecting our investment in consumer-facing areas”.
The announcement was short on detail but it expects its proposed changes to “unlock an additional £60 million of savings by FY27, enabling us to continue to fund our biggest growth opportunities”. With other cost cuts announced earlier, it should bring the combined annualised savings to £100 million by FY27.
It expects these proposed incremental savings to come from operating expenses, with increased efficiency of spend in procurement and real estate, plus a big wave of job cuts affecting up to 1,700 people globally over the life of the programme. That’s a massive slice of its global workforce, about which we’ll clearly hear more in the quarters to come.
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