Burberry reported a jump of 32% in adjusted operating profits followed by reaffirming its outlook for the year in the luxury fashion company’s preliminary results on Wednesday. Burberry’s results were in line with market and management expectations.
Burberry noted a 21% rise in revenue from £2.34bn to £2.83bn in 2022 with retail comparable store sales contributing through an 18% rise and full-price comparable-store sales seeing a 24% rise.
The group’s revenue jump was driven by the recovery from the pandemic whereas, the 18% rise in retail comparable stores was due to full-price sales which were slightly counteracted by the exit of markdowns in mainline and digital stores.
Burberry’s wholesale revenue generated £512m to the the total group revenue due to strong orders in Americas and recovery in Asia from travel retail, and licensing added £41m in 2022.
Total comparable store sales increased 6% as the pandemic caused disruptions in operations particularly in the fourth quarter of FY22.
However, Asia Pacific noted a 13% rise in comparable store sales with full-price sales noting an increase of 29%.
In Asia, Mainland China’s comparable store sales increased 37% and full-price comparable store sales was up 54%.
EMEIA comparable store sales dropped by 18% with full-price seeing an 11% decline owing to a slowdown in tourist shopping which generally contributes 50% of the total comparable store sales in the region.
Due to larger investments and “cost normalisation”, Burberry reported an 18% increase in operating expenses.
The group reported a 4% increase in operating profit to £543m and adjusted operating profit surged 32% to £523m which matched management expectations said the luxury fashion company. Burberry’s reported operating margin was 18.5%.
Pretax profit for Burberry recorded a 4% rise from £490m to £511m in 2022 out of which £396 was attributable to shareholders.
In 2022, the group generated £340m in free cash flow which was £9m lower than 2021 and noted a cash conversion of 106%.
Burberry declared an 11% rise in the annual dividend to 47p from 42.5p in 2021.
The cash generated from operating activities rose due to higher profits and strict management of working capital.
Burberry has confirmed its guidance of high single-digit revenue growth for 2022.
Gemma Boothroyd, Freetrade analyst, said,”New CEO Jonathan Akeroyd will be hoping that by winding up markdowns, the retailer will re-establish its exclusivity. But the only way that strategy pays off is if countries with high spending power play ball.”
“Akeroyd’s ability to hit the ground running heavily depends on demand from the Chinese market. Today’s results show the demand is there, the problem is, China’s Covid policies are out of his control.”
“China’s a long-term investment. Current Covid restrictions are short-term hurdles, but Burberry’s eyes are on the longer-term horizon. And it’s sensible. Akeroyd’s overarching goal is to reposition the brand, redefining its reputation.”
“That transformation won’t happen overnight. So investors still twiddling their thumbs on Burberry’s pre-pandemic share price recovery will be waiting a while still.”