Burberry targets £100m cost savings

20 May 2016

Luxury goods firm Burberry expects to deliver at least £100m of cost savings by 2019 by improving efficiencies in areas such as procurement after announcing a 7% drop in profits.

The fall brought profits for the year to March 2016 to £415m compared to £444m for the previous year.

Burberry said around half of its anticipated savings are expected to come from significant changes in ways of working, with the balance coming from reducing operating expenses and increasing the efficiency of spend in areas such as non-stock procurement and marketing.

The company said its performance over the last 12 months reflected a difficult period for the luxury sector as a whole as global luxury demand remained subdued.

While the personal luxury goods market has grown on average by about 7% per annum since 2010 it is expected to grow by low single-digit figures in coming years.

The bulk of growth is expected to come from Chinese consumers.

In China Burberry has 63 stores and is planning to open three more in 2017, with a particular focus on Beijing, the company’s largest market in China.

In the second half of the year the company rolled out a new inventory model that allows digital transactions in 44 countries to draw on inventory in regional distribution centres and store networks.

The approach, which was tested in China, is being rolled out to stores across the United States and Europe, Middle East, India and Africa.

Burberry said this strategy had improved stock availability by around 5% and contributed to digital growth.

About a third of revenue growth over the next three years will come from e-commerce initiatives.

A new £50m state-of-the-art manufacturing and weaving facility in Yorkshire, England will be completed by 2019. The facility will offer increased capacity for trench coat production and more sustainable and efficient ways of manufacturing.

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