Burberry pulls dividend as luxury takes 'time to heal'

LONDON (Reuters) - Britain’s Burberry said the luxury fashion industry would take time to recover from the profound impact of the coronavirus outbreak that lowered its comparable sales by 27% in the final quarter and led it to scrap its final dividend.

FILE PHOTO: People queue outside a Burberry store on Regent Street, London, Britain September 17, 2018. REUTERS/Henry Nicholls

The company, famous for its trench coats and trademark check, said the dividend cancellation would save about 120 million pounds to help it through the crisis and it would review the payout at the end of its 2021 year.

Shares in Burberry rose 2.6% at 0950 GMT as the sales fall was less than the 31% expected by analysts.

Chief Executive Marco Gobbetti said Burberry had been making progress in repositioning its brand before the “profound impact” of the novel coronavirus.

“It will take time to heal, but we are encouraged by our strong rebound in some parts of Asia and are well-prepared to navigate through this period,” he said on Friday.

Burberry, in common with other high-end labels, saw the impact of the pandemic in late January when sales in China started to shrink.

As the coronavirus spread, Burberry suffered significant losses in Europe and North America in March.

Chief Financial Officer Julie Brown said Asia was recovering, with sales in mainland China and South Korea ahead of the prior year and showing an improving trend.

For the wider region, including Hong Kong, which is reliant on Chinese tourists, the picture was mixed, she said, while trading in the rest of the world was hobbled.

“Half of our stores are currently closed, and we expect our first quarter to be severely impacted, with store closures likely to be at or near their peak for most of the period,” she said.

Burberry has shifted inventory to online channels and to stores in Asia that have reopened, she said.

The company took a 68 million pound charge for inventory, part of 243 million pounds in crisis-related charges.

Revenue was 2.63 billion pounds, down 3%, and adjusted operating profit was 404 million pounds, down 8% at constant exchange rates, for the year to March 28.

Editing by Costas Pitas, Michael Holden and Barbara Lewis