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Burberry unveils £150mln share buyback as it reports 2018 profit growth

Last updated: 03:50 16 May 2018 EDT, First published: 03:32 16 May 2018 EDT

Burberry
New chief creative officer Riccardo Tisci will show his first Burberry collection in September

Burberry Group PLC (LON:BRBY) announced a £150mln share buyback on Wednesday as it reported a 2% increase in 2018 adjusted profit.

The luxury fashion retailer posted a profit of £467mln for the year ended March 31, compared to a profit of £459mln the previous year.

Analysts expected adjusted operating profit of £453mln.

Revenue dropped 1% to £2.73bn from £2.77bn after handing over control of its fragrances and cosmetics arm to American beauty conglomerate Coty.

Last October Coty agreed a £180mln deal to manufacture and distribute Burberry's beauty range.

Excluding beauty wholesale, Burberry's revenue rose 2% to £2.6bn from £2.5bn.

Comparable store sales increased 3%, accelerating from the 1% growth reported a year ago.

Burberry transformation showing 'promising early signs', says CEO

Chief executive Marco Gobbetti has been repositioning Burberry into a higher luxury segment and has poached designer Riccardo Tisci from Givenchy as chief creative officer to assist in delivering the strategy.

READ: Burberry unveils former Givenchy designer Riccardo Tisci as its new chief creative officer

“While the task of transforming Burberry is still before us, the first steps we implemented to re-energise our brand are showing promising early signs,” Gobbetti said.

“With Riccardo Tisci now on board and a strong leadership team in place, we are excited about the year ahead and remain fully focused on our strategy to deliver long-term sustainable value.”

READ: Burberry shares drop as Groupe Bruxelles Lambert sells entire 6.6% holding via private placement

Tisci started as chief creative officer March, replacing Christopher Bailey, and his first collection will be shown in September.

In another major development, last week the group revealed it has bought an Italian luxury leather goods business from CF&P. Burberry hopes the acquisition will help it compete against Louis Vuitton, Gucci and Celine.

Burberry hikes dividend, leaves forecasts unchanged

Burberry raised its dividend by 6% to 41.3p each as it maintained its 2019 guidance of “broadly stable revenue and operating profit margin” at constant exchange rates.

The company ended the year with net cash of £892mln, compared to £809mln a year ago, thanks in part to inflows from the deal with Coty.

Its strong cash position lead the group to announce a share buyback that will be completed during the 2019 fiscal year. 

Shares rose 1.35 to 1,828p in morning trading. 

"These numbers will reassure investors," said Steve Clayton, manager of the Hargreaves Lansdown Select UK Growth Shares fund.

"Market confidence in the Burberry story was knocked last November by Marco Gobbetti’s decision to invest time, effort and profits into the move to push Burberry ever more upmarket.

"We think Burberry are doing the right thing, because top luxury brands are fabulous assets that generate cash reliably, year after year."

-- Adds details from results, comments from analyst -- 

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