Luxury goods firm Burberry has said the benefits from an SAP rollout will help it weather the recession, as it reports a £16.1 million annual loss.
The fashion house, which generated a £196 million profit the year before, said its SAP enterprise resource planning rollout is now 80 per cent complete, with the system in use in 15 countries.
Investments in SAP and other IT systems would play a significant part in delivering £50 million annual savings, it reiterated, through improvements to supply chain and logistics as well as improved visibility of retail sales and inventory.
All of Burberry’s largest markets are now using the system, with US stores going live in April. In a statement to investors, Burberry said SAP is “giving greater visibility from design through to the consumer”, and improved inventory management in all markets. Around three quarters of its revenue is processed through the system.
In Europe, SAP was already providing improved management planning and extracting better profit margins, and would provide a “long tail” of benefits over time, it said.
Investments in SAP and other IT systems will contribute to up to £20 million annual savings, Burberry said, from “supply chain and corporate processes”. IT is supporting the move to a smaller number of distribution centres, rationalisation of materials suppliers and the move to distribution of goods by sea.
It is also targeting a further £30 million cost savings, with IT supporting a modernised supply chain in Spain, a market where the heavy writedowns played a large part in Burberry’s losses. Across the globe, Burberry has also rationalised manufacturing facilities and cut 15 per cent of its workforce.
In a statement to investors, Burberry chief executive Angela Ahrendts said the company had acted decisively with the cost cuts to tackle the recession. She added: “We continued to refine and implement our key brand strategies, adding innovation to core outerwear and accessories, while making significant progress on our IT and operational initiatives.”
After the SAP rollout, Burberry said there would be a “reallocation of IT resources” to focus on its e-commerce site, where it had experienced double digit growth, “albeit from a small base”.