The next chapter: growth and acceleration
“In the last three years we have transformed our business and built a new Burberry, anchored firmly in luxury. We have revitalised our brand image, renewed our product offer and elevated our customer experience while making further progress on our ambitious social and environmental agenda. In spite of COVID-19, we achieved our objectives for the period and delivered a strong set of results in FY21, ending the year with good full-price sales growth. In this next chapter, supported by these foundations and the strength of our teams, we will accelerate our growth and deliver value creation while continuing to build a more inclusive and sustainable future,” stated Marco Gobbetti, Chief Executive Officer of Burberry.
- Recovery accelerated through the year leading to Q4 FY21 comparable store sales increasing 32 % year on year and -5% compared with Q4 FY19 despite an average 16% of stores being closed. Within this, full-price sales grew 63% in the quarter (12% versus Q4 FY19) driven by Mainland China, Korea and the U.S.
- For the full year revenue decreased 10 % at CER, impacted by store closures and reduced tourism, with strong recovery in the second half +8 % at CER (-30 % in H1 FY21): Within this, FY21 full-price comparable store sales grew +7%, accelerating through the year driven by:
- excellent response to product, with growth in our strategic categories and in selling prices.
- increasing brand strength attracting new and younger customers.
- local customer traction, thanks to innovative selling formats during lockdowns.
- Leveraged digital leadership, including opening our Social Retail store in Shenzhen Bay, driving double digit comparable sales growth across all regions.
- Adjusted operating profit GBP 396 milliom, -8% CER, reported operating profit GBP 521 million up 176 %.
- Full year dividend reinstated at FY19 levels of 42.5 Pence on the back of strong cash generation.
In our next chapter we will focus on delivering growth whilst continuing to enhance the quality of our business. Taking FY20 as the base year, we expect revenue to grow at a high single digit percentage compound annual growth rate at FY21 CER in the medium term. This will be underpinned by the continued outperformance of full-price sales. We will continue to strengthen brand equity by exiting markdowns in mainline stores in FY22. This is a headwind against our comparable store sales growth amounting to a mid-single digit percentage in the full year.
In FY22 adjusted operating margin progression will be impacted by operating expense normalisation and increased investment to accelerate growth, with more meaningful margin accretion thereafter.
We are focused on and continue to invest in our sustainability and social goals by becoming carbon neutral by 2022, championing diversity and inclusion and positively impacting one million people in the communities in which we operate.
FY21 was the third year of our journey to transform Burberry and anchor our brand firmly in luxury. Against the backdrop of the COVID-19 pandemic, our goal this year was to strengthen our foundations, adapting to the environment and positioning the brand for acceleration and growth.
Despite the onset of the COVID-19 pandemic, which led to a significant reduction in operating hours and an average of 18 % of our global store network closed in the financial year, we completed the objectives for the first phase of our strategy, ending FY21 with strong full-price momentum.
Supported by the strong foundations we have built, we adapted swiftly, driving performance through new product launches and inspiring communications and shifted our focus to rebounding economies and digital channels. As a result, we achieved +7 % growth in full-price comparable store sales in the year, with double-digit growth across Americas, Korea and Mainland China and good traction across our core strategic categories.
In terms of brand activity, we continued to reinforce our luxury positioning through emotive campaigns and activations and adopted a highly localised approach in every market. Recent examples include the launch of our first locally produced campaign film for Lunar New Year in January. This had an exceptional response from local Chinese consumers and increased the number of new fans to our WeChat page in a single month by ~15x compared to our 2020 monthly average. In addition, in February and from the start of the new financial year in April respectively, we debuted Riccardo’s first dedicated menswear and womenswear presentations for AW21. These presentations generated an extraordinary amount of conversation on Instagram, with triple- and double-digit growth compared to our SS21 Show, respectively. Similarly in March, we drove further brand heat with the launch of our global campaign to celebrate our SS21 collection which generated social coverage almost double our SS20 campaign. Continuing to build brand momentum, these activations have also attracted new and younger customers to the brand.
Our new collections have also resonated strongly, supporting double digit growth in full-price sales to both new and repeat customers. In addition, within full-price, our strategic pillars – leather goods and outerwear – have returned to mid and high single digit growth respectively for FY21. Strong performance in leather goods has been supported by our new established shapes including the Pocket, which was the focus of our first bag campaign and programme of pop-ups earlier in the year, and the Olympia, our newest shape and the focus of our upcoming bag campaign in May. Across outerwear, we have focused on elevating and diversifying our offer. For example, in January we launched Future Archive, a unique capsule reinterpreting outerwear classics from the Burberry archive. By successfully driving the performance of our strategic pillars, we have supported high single digit growth in prices – further demonstrating the strength of our brand.
In terms of distribution, we elevated the brand experience across our full-price channels and leveraged our digital resources to support both offline and online sales. Within Mainline, we continued to invest in upgrading the store portfolio with 11 new openings and 15 closures this year and developed our new store concept, which we will begin to roll out in early FY22. In addition, we increased our focus on in-person and virtual appointments to mitigate the impact of reduced traffic and drive traction with local customers. This contributed to growth in sales to local clients in most regions. We also leveraged our digital capabilities to bridge online and offline, including scaling our omnichannel journeys (e.g. virtual appointments, virtual client events) as well as pioneering social retail – launching our first social retail store in Shenzhen Bay. Our Shenzhen store has provided a testing ground for a number of innovative experiences and concepts that we plan to roll out in the coming year to drive further consumer engagement. In terms of online, we have continued to capture the recent shifts in consumer behaviour through our digital innovations to deliver double digit growth in full-price online sales across all regions, from a strong base.
Building a more sustainable future
We maintained our focus on driving positive change and building a more sustainable future through our Responsibility agenda. All of our stores in Mainland China are now carbon neutral and we are on track this year to use 100% renewable electricity and have a carbon neutral footprint across all of our operations globally. In the next 12 months, every product we make will have more than one positive environmental or social attribute, achieved by driving improvements at the sourcing and product manufacturing stage. Stretching our ambitions, we now aim to be net-zero across our own operations and extended supply chain by 2040 and will continue to set leading standards for our industry and pioneer innovative solutions to create real system change.
We also made strong progress on our commitment to build a more diverse, equitable and inclusive organisation. We rolled out our global Diversity and Inclusion strategy, with aspirational goals supported by training and global programmes designed to attract and retain diverse talent, foster an open and inclusive culture and drive education and awareness. During the year, Burberry was the first luxury company to partner with the Business Disability Forum, Investing in Ethnicity, and the Stonewall Diversity Champions Programme, and one of the first in our industry to join The Valuable 500. We also became signatories of the British Retail Consortium D&I Charter and BBC’s Creative Allies initiative, working collaboratively to achieve progress across the retail and creative industries. To mark International Women’s Day 2021, we continued our support for London Youth and The Prince’s Trust Women Supporting Women initiative, providing resources and development opportunities for young women. Our commitment to gender equality was recognised by Burberry’s inclusion in the 2021 Bloomberg Gender-Equality Index, scoring 10 percentage points more than the company average and reflected by a leading position in the latest Hampton-Alexander Review report for women in leadership in the FTSE 100 for the third consecutive year.
Responding to COVID-19
Throughout the year, the health and wellbeing of our people has been our priority. We implemented rigorous safety measures across our sites whilst providing resources to support our teams. We also further strengthened our support for the global effort to combat the outbreak of COVID-19. Burberry and the Burberry Foundation recently made donations to UNICEF’s COVID-19 Vaccines Appeal, building on our efforts earlier in the year to provide funding for food charities, vaccine research and retool our trench coat factory in Castleford, Yorkshire to manufacture non-surgical gowns and source masks through our global supply chain. Following Burberry’s partnership with Marcus Rashford MBE and charities supporting youth in the UK, USA and Asia, the Burberry Foundation also entered a longer term partnership with London Youth, providing young people in some of London’s most deprived communities with the resources and support to build resilience against the impacts of the COVID-19 pandemic.
UK withdrawal from the EU
We continue to adapt to the EU-UK Trade and Cooperation Agreement to ensure minimal disruption to our operations and customers. We have initiated a number of actions to mitigate duty costs including collating evidence in support of claiming preferential duty rates, streamlining product flows to minimise movements of goods between the UK and EU, and establishing a customs warehouse.
The next chapter: accelerate and grow
Having successfully navigated our transformation and established a strong foundation, we are well-positioned to embark on the next chapter of growth and acceleration. In this phase, we will leverage our unique brand equity to deliver sustainable, high-quality growth and continue to drive positive change. In terms of revenue, we will accelerate growth by focusing on five levers: i) continuing to build brand advocacy and community; ii) focusing on our core luxury categories, outerwear and leather goods; iii) driving our store performance through the roll-out of our new store concept and scaling of new, omnichannel experiences; iv) supercharging online sales by leveraging our leadership in digital; and v) increasing our focus on full-price, including significantly reducing markdown in Mainline by the end of FY22. This acceleration will support our profitability through increased full-price and digital penetration, improved sales density and continued tight cost control. As a result, our ambition in the medium-term is to achieve high-single digit compound revenue growth at FY21 CER on FY20 base– with overperformance in full-price – and meaningful operating margin accretion.
Throughout, we will be relentless in our focus on our sustainability and social priorities. We are committed to continuing to build not only a financially stronger Burberry but also a better company. We will fuel the creativity of our colleagues by championing diversity, equality and inclusion and supporting their wellbeing. We will empower young people in our communities, providing more of them with the skills, confidence and opportunities to succeed. Lastly, we will create a more sustainable future for luxury by further reducing our environmental impacts and helping transform our industry.