Burberry canceled full-year dividend payments to shareholders while sales plummeted 27% in its fourth quarter due to the blockade of Covid-19.
The British luxury brand, best known for its trench coats and signature checking, said it canceled the year-end payment to shareholders, valued at around £ 120 million last year, and borrowed £ 300 million through the business support system supported by the British government after the slump in sales in the three months to 28 March.
Pre-tax earnings plummeted 62% to £ 169 million in the year up to March 28 after the company said it was making a one-off provision of £ 241 million related to the coronavirus crisis, including £ 68 million related to the shares, which will be sold at a strong discount and a devaluation of 157 million pounds on the value of its 465 stores due to bad trade.
The company said it was faithful to its commitment not to burn unsold stocks and to eliminate excess product by moving it to parts of the world where stores were now traded and through online discounts, sample employee sales and recycling.
Burberry said it could not predict sales and profits for the year ahead as it would take time for luxury purchases to return to normal levels worldwide in the light of the pandemic.
“The virus has clearly changed the world and the way people lead their lives. There will be significant pressure on the luxury consumer. Social distancing will inevitably slow down economic trade, “said Julie Brown, chief operating officer and chief financial officer.
The company said half of its stores were currently closed and that negotiations in the three months to the end of June would likely be “severely affected”.
Sales dropped 3% to £ 2.6 billion a year after Burberry was forced to close most of its stores in mainland China in February, while those that remained open operated on shorter hours and had “significant drops” in the number of visitors.
Trading was also affected by the closings in Europe in March and the interruption of months of protests in Hong Kong, where sales fell 40% for the year.
Burberry said he was reviewing his store in Hong Kong while Brown said that tourist destinations in Asia and Europe would likely have fewer visitors for the time being.
Chinese buyers account for 40% of Burberry’s sales and usually spend half their money overseas, but Brown said they are now more likely to buy locally.
He also said that online shopping and digital communication with shoppers would be even more important and that Burberry’s investments in those areas meant that he was well positioned to cope with the current environment.
The company said that negotiations in China started to improve in March and reopened all the stores there, but the number of buyers in other parts of Asia, including Hong Kong, was still significantly lower than usual.