LONDON, United Kingdom —Burberry has a fashion problem. Luckily it doesn’t have a cashflow problem too.
Burberry said Thursday it generated cash from operating activities of £689 million ($897.6 million) in the year to March 31, a big jump from 2016. This enabled it to announce a 5 percent increase in the full-year dividend, as well as an extension of its share buyback program.
Burberry also confirmed it’s on track to achieve at least £100 million of annual cost savings by 2019. All this is a comfort for investors, because there’s little to console them elsewhere. The company still has a mountain to climb to make itself a millennial must-have.
Same-store retail sales rose 2 percent in the final three months of the fiscal year. That is far less eyecatching than the 15 percent increase in organic growth reported by LVMH’s fashion and leather goods division, and the whopping 31.6 percent gain at Kering‘s luxury goods division, turbocharged by Gucci.
Burberry has enjoyed a boost from the slump in sterling — both elevating the number of travelling luxury consumers snapping up its trench coats and checked scarves, and translating overseas earnings. But that effect is set to fade. In fact, Burberry expects exchange rates to have a £30 million adverse effect on earnings in the year to March 2018, compared with the 128 million benefit in 2017.
New chief executive officer Marco Gobbetti will take up his full post at the beginning of July. That should underpin Burberry‘s efforts to become more productive and continue to cut its bloated cost base.
But as Gadfly has argued, what Burberry needs is fresh creative impetus. And that might be tricky with outgoing chief executive Christopher Bailey remaining as creative director. Where Burberry has reinvigorated products, such as handbags, it has paid off. A full reinvention in the vein of Gucci’s overhaul might be asking too much, but the company needs to do more to make Burberry hip…