Investing.com -- Burberry (LON:BRBY) reported stronger-than-expected fourth-quarter sales and full-year adjusted operating profit on Wednesday, pointing to early signs of brand momentum under CEO Joshua Schulman’s turnaround strategy.
The company also expanded its cost-cutting measures and indicated that these could include reductions in people-related costs, potentially affecting around 1,700 jobs worldwide.
Burberry’s shares popped more than 7% after the market open in London.
For the financial year ending March 29, the British luxury label posted an adjusted operating profit of £26 million ($34.55 million), narrowly avoiding a loss. While the figure marks a steep drop from £418 million a year earlier, it still came in above the consensus estimate of £11 million.
Comparable store sales in the fourth quarter fell 6%, outperforming analysts’ consensus for a 7% decline.
Gross margin for the year stood at 62.4%, down 520 basis points from the prior year, largely due to inventory clearance. The figure was broadly in line with estimates.
“After a challenging first half, we have moved at pace to implement Burberry Forward, our strategic plan to reignite brand desire, improve our performance and drive long-term value creation," said Joshua Schulman, CEO of Burberry.
"While we are operating against a difficult macroeconomic backdrop and are still in the early stages of our turnaround, I am more optimistic than ever that Burberry’s best days are ahead and that we will deliver sustainable profitable growth over time.”
Still, Burberry kept its forward guidance limited due to ongoing geopolitical uncertainty. It expects wholesale revenues to fall by a mid-teens percentage in the first half of fiscal 2026, while retail space contribution is projected to be neutral for the full year.
Capital expenditure is estimated at £130 million.
The company raised its cost-saving target for FY26, aiming for an annualised run-rate of £80 million, up from £40 million previously. This follows the delivery of £24 million in savings in FY25, in line with plan. The increase will be supported in part by higher restructuring charges, now expected at £50 million versus a prior estimate of £20 million.
Burberry expects the additional savings to be driven by lower operating expenses, including more efficient spending in procurement and real estate, as well as reduced people-related costs, "which could impact around 1,700 roles globally over the life of the programme, subject to consultation where applicable." the company said.
"Burberry has delivered a better than expected 4Q/FY25 results print and increased its anticipated annualised cost saving target for FY26E," RBC Capital Markets analysts led by Piral Dadhania said in a note.
"We view these results as an encouraging first step, and believe management are pursuing the right strategy to reset the business on a more level footing, which in time should support a return to positive revenue and profit growth," they added.