Burberry Group PLC announced a cost-cutting program and share buyback on Wednesday regarding to its 8% fall in full-year profit that leads to Burberry warned that pretax profits for the financial year through 2017 would be at the lowest in the financial forecasts. In the earlier time, the company’s share price fell 3% and downed 5.345 in London trading at last check, even though Burberry Group PLC declares 5.1% increase of their dividend from 35.20p/share annual dividend to 37.0p/share annual dividend. Burberry reported a net profit of £309.5 million for the year ended March 31, down from £336.3 million a year earlier. Adjusted pretax profit, which strips out one-time items, fell to £420.6 million from £455.8 million a year earlier. It is reported that there 38% decrease in the company’s share price over last 12 months and fallen 7% in pre-tax profit for the full year.
Today, Burberry’s chief creative and chief executive officer Christopher Bailey announced their new strategy that aimed at increase their revenue and profit in the 2015-16 fiscal year, and Burberry promised “to reduce complexity and simplify processes”. This “productivity and efficiency” plan has been announced with £20 million ($29 million) of cost savings due this year, another £100m of annualised cost savings by 2019 were expected to come from reducing operating expenses and improving efficiency in areas such as marketing, which roughly 10% of the company’s 2016 cost base. Burberry plans to improve the efficiency of global operations and plough investment into its biggest growth opportunities like promoting online shopping.
Burberry also under pressure from decreasing shopping in Asian market to a sharp downturn in Continent European sales, which accordingly raised disappointing to some investors. This problem leads to Burberry plan to transfer further potential in e-commerce and expanding their online shopping. Burberry is in effort to attracting younger customers and millennials that for their “innovative, creative and exciting” entry price points.
Raising stuff cost is also a problem to Burberry. From analysts at UBS recently, they said that Burberry’s operating expenses are close to 500 basis points higher than its peers, with the company hiring about 15% more sales staff. “Whilst there is clearly a well-talked-about cost opportunity, notably from employee expenses we believe, the bigger prize would be for Burberry to improve as a retailer,” said UBS analyst Helen Brand, adding that Burberry could improve employee productivity and average selling prices.