Burberry Group plc (LON:BRBY) (BRBY.L) has released full year results today for the year to 31 March 2018.
Comparable sales have grown by 3%, with the company on track regarding the execution of its turnaround plan. Its revenue was down 1% at constant currency, while adjusted operating profit increased by 5% versus the previous financial year.
Burberry has started the evolution of its distribution, which includes strategic retail store closures. It has also made a strategic acquisition to create a centre of excellence for luxury leather goods.
The company’s collections have resonated with new customers and top-tier clients according to today’s update. Its cumulative cost savings of £64 million are ahead of plan, while it has successfully completed the transfer of Beauty to the Coty strategic partnership as planned.
The company is trading in line with expectations for the 2019 financial year. It is on target to deliver cumulative cost savings of £100 million, while a new share buyback of £150 million has been announced.
In my view, Burberry is performing relatively well under its new strategy. Although it is still early days in terms of the implementation of its refreshed business model, it seems to be making encouraging progress. Should this continue, it could have a positive impact on its financial performance and may improve investor sentiment over the medium term.
I feel that the stock has upside potential from its current level. It has access to fast-growing consumer markets and with a strong brand and a high degree of customer loyalty, it could generate improved sales performance in future. Alongside cost savings, this could catalyse its EPS growth rate in future years.
As a result, Burberry is a stock that I’m optimistic about for the future. Its new strategy may entail higher capital expenditure over the next few years, but investment in the business may mean improved performance over the long run.