Luxury clothing manufacturer Burberry has warned its shareholders that profits for 2008 will be lower than expected, but in a statement to the stock exchange CEO Angela Ahrendts said the existing IT and supply chain rationalisation initiatives will deliver efficiencies in the “near term”.
“The fundamentals of Burberry remain strong, despite the current very challenging environment,” Ahrendts said. “With our supply chain and IT investments in their final phases, we are now in a position to drive significant efficiencies in the near term. These benefits, along with continued investment in the business, and proven strategies underpin our confidence in the future long-term growth of Burberry.” Following the statement Burberry shares dropped by 18 per cent.
Reporting its interim results for the first half of 2008 to September 30, 2008, Burberry said it has already identified “cost efficiencies of £15 to £20 million,” that were part of its investments in supply chain, IT and infrastructure. Burberry said it was also carrying out a further review into opportunities for “significant savings”.
Shares in Burberry fell by 18.5 per cent following the release of the interim results. Burberry said the global economic climate was behind the warning. The British company has been hit particularly hard by the dramatic slow-down of the US economy. Burberry said its US outlets are expected to place smaller orders. Total revenues for the manufacturer were up 20 per cent to £539 million. Retail revenues were up 21 per cent and wholesale revenues were up by 23 per cent. The US, European and emerging markets performed well, apart from Spain.
Burberry has been carrying out a standardisation implementation on to SAP enterprise resource planning systems and announced in June that it had delivered £20 million in cost reductions due to improvements in their supply chain it had delivered.