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LONDON (Alliance News) - Burberry PLC said on Wednesday that annual profit rose as revenue dipped slightly amid a year of "transition".
The FTSE 100-listed stock rose on the figures, up 2.6% at 1,850.50 pence on Wednesday.
Steve Clayton, manager of the HL Select UK Growth Shares fund, which holds a 3.75% position in the stock, commented: "Marco Gobbetti's strategic transformation plans look to have got off to a solid start."
Gobbetti joined Burberry - known for its checked print and trench coats - in January last year from French firm Celine - known for leather goods - taking over the role of CEO at the London-listed company in July and replacing Christopher Bailey.
Having joined Burberry as design director in 2001, Bailey moved up to chief creative officer in 2009 before adding the chief executive role to his name in 2014. He announced his intention to give up the CEO position in 2016, to leave him as chief creative officer & president.
Bailey then announced his decision to step down from these remaining roles in October last year, and left the company at the end of March 2018. Bailey will, however, continue to provide support to Gobbetti and the team on the transition until the end of this year.
The annual results on Wednesday were Gobbetti's first as CEO at the firm, and were in line with expectations.
"These numbers will reassure investors. Market confidence in the Burberry story was knocked last November by Marco Gobbetti's decision to invest time, effort and profits into the move to push Burberry ever more upmarket," said HL's Clayton.
Shares in the British fashion brand were also knocked last week - falling 6.1% in one day - after Groupe Bruxelles Lambert sold its entire 6.6% holding in the company.
For the year to March 31, Burberry's revenue declined 1% both at reported rates and constant currency to GBP2.73 billion, with comparable retail stores sales up 3%, as adjusted operating profit rose 2% at reported rates to GBP467 million.
This was in line with consensus forecasts, which had placed revenue at GBP2.73 billion, and comparable sales growing 3%. Adjusted operating profit, however, came in slightly above the expected GBP453 million.
Adjusted operating profit benefited from a "positive" retail performance, GBP44 million incremental cost savings - with the cumulative total now standing at GBP64 million - and improved Beauty profitability due to reduced marketing and inventory charges.
Pretax profit came in at GBP412.6 million for the year, up from GBP394.8 million last year.
"Whilst these are not results which shoot the lights out, Burberry will be pleased with its progress given the fact that it is in the early stages of its planned transformation [...] the increasingly important Asia Pacific region, and mainland China in particular, showed continuing growth in an area in which potential riches abound," said Richard Hunter, head of markets at Interactive Investor.
Retail sales rose 3% at constant exchange rates to GBP2.18 billion in the period, which was up 2% at reported rates.
Mainland China delivered high single-digit percentage growth, slowing to mid-single digits in the second half due to strong comparatives, Burberry said. Hong Kong improved through the year, while Korea declined but showed improvement in the second half.
The UK delivered low single-digit percentage growth, with growth in the first half offset by a decline in the second, as expected, the company said. Continental Europe declined marginally with tourist spend softer in the second half.
The Middle East remained challenging, Burberry said, hit by the macro-environment.
In the US, improved traffic trends coupled with increased year-on-year conversion underpinned a return to growth in the second half.
Asia Pacific saw revenue up 4% at reported rates to GBP1.08 billion, with Europe, Middle East, India & Africa up 4% to GBP938 million and the Americas down 3% to GBP611 billion.
By product, the firm said a "more complete" wardrobe offer drove sales in tops, skirts and trousers in the second half. There was continued strength in smaller leather goods and new handbag launches.
Firming up this leather momentum, Burberry on Monday said it had signed an agreement to buy a luxury leather goods business from a long-standing Italian partner, CF&P.
"This will create a centre of excellence for our leather goods, covering all activities from prototyping, product innovation and engineering to the coordination of production. It will give us greater control over quality, cost, delivery and sustainability in this strategically important category," Burberry said on Wednesday.
Excluding Beauty, Wholesale revenue for the year was unchanged at constant exchange rates, though up 2% on a reported basis. This was slightly better than expectations, Burberry said.
The company oversaw a net closure of 20 stores in the period, comprising 12 mainline, 2 concessions and 6 outlets.
Burberry raised its total dividend 6% to 41.3p from 38.9p last year, and will initiate a GBP150 million share buyback.
"In a year of transition, we are pleased with our performance as we began to execute our strategy. While the task of transforming Burberry is still before us, the first steps we implemented to re-energise our brand are showing promising early signs," said CEO Gobbetti.
"With Riccardo Tisci now on board and a strong leadership team in place, we are excited about the year ahead and remain fully focused on our strategy to deliver long-term sustainable value," Gobbetti added.
Former Givenchy creative director Riccardo Tisci was chosen as Burberry's chief creative officer in March this year. Tisci is due to present his first collection in September.
The company said there is no change to its guidance of "broadly stable revenue and operating profit margin" at constant currencies in 2019 and 2020.
Looking ahead, Burberry is targeting cumulative cost savings of GBP100 million at the end of its current financial year, which was represent an incremental GBP36 million on those achieved so far. By the next of the next financial year, these savings are to amount to GBP120 million.
