Burberry redesigned

Full-year results in May – which showed a 1 per cent decline in sales but a more solid 5 per cent improvement in underlying pre-tax profit – didn’t reflect any sales of collections by new design boss Riccardo Tisci, so there could be an uplift in revenues yet to come once his products hit the shops.

As part of the upcoming half-year results, analysts at Berenberg expect to see progress in like-for-like retail sales, pencilling in a 3 per cent rise which would represent a continuation of the growth reported for the first three months of the year. Group sales growth is likely to be weighed on by: a small impact from the timing of the half-year end; an expected decline in the wholesale channel due to reorganisation efforts; and little to no boost from added space. Foreign exchange rates are also a persistent challenge, with Berenberg expecting to see a £20m hit to statutory profits in the first half. But fewer shares (the cash-rich group bought back £355m of shares last year and is currently executing a new £150m share buyback) and a lower tax rate should limit the damage done to underlying, constant-currency EPS.

Mr Tisci isn’t the only newcomer at Burberry. Marco Gobbetti – the chief executive who joined the group in July 2017 – continues to make his presence felt, attempting to turn the brand more digital and keeping physical growth to a minimum. This led to the closing of a net 20 sites last year, and the launch of a new online partnership with designer marketplace Farfetch. Cost-cutting remains high on the agenda, too, with a projected £100m in savings this year alone. Net space should reduce by around 1 per cent during the current financial year as Burberry continues to identify which stores are most successful.

The wholesale business continues to undergo a transition as Burberry curtails how many wholesale partners it works with and across what categories, particularly in the US. The beauty division is in the process of moving over to a licensing arrangement, which is also to blame for some of the expected revenue decline for the wholesale segment. But all of this is part of Burberry’s transformation plan, which aims to prioritise full-price, direct-to-consumer retail sales.