At Present, Consumers' Demand For Burberry Will Remain Weak.

Britain

Brand Burberry has recently announced a decline in corporate profits for second consecutive years, and today announced that it will introduce a plan to save 100 million pounds. The reason for this decision is that the company's performance is sluggish and global demand for luxury goods has fallen.

In addition, in order to stimulate the growth of stock prices, Burberry also released a 150 million share buyback plan.

On Wednesday, Burberry announced that it expected to adjust the pre tax profit by 10% to 421 million pounds ($608 million) in the 2015-2016 fiscal year ending March.

The company's annual revenue fell 1% to 2 billion 400 million pounds (3 billion 780 million US dollars).

The year-on-year turnover fell by 1%, but the negative turnover of Hongkong and Macao increased by 3%.

The company said the goal of cost savings will be achieved in 2019, adding that its 2017 profits may be close to the bottom of the projected range.

At present, consumer demand for Burberry will continue to remain weak, with an average annual growth rate of low single digit.

"The growth of most sectors of the company is expected to come from emerging and existing Chinese consumers, including tourism consumption and local consumption," Burberry said.

Burberry is affected by Hongkong.

The decline in demand is particularly serious, with only a few stores in Japan, but Chinese consumers have moved to Japan in the face of a weaker yen.

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Burberry the turnover of Japanese stores increased more than doubled last year, but the total turnover of the whole country accounted for about 2% of the total.

Burberry said in a statement, "the external environment is still challenging, and the inflationary pressures on potential costs are continuing.

"At present, the company is expected to benefit from the exchange rate of about 10 million this year, less than the figures predicted in April, and performance pay has doubled to 40 million pounds.

According to the company plan, half of the cost savings will come from changes in the way Burberry works, reducing work complexity, simplifying workflow and eliminating duplication of work.

The company said it could save about 20 million pounds this year.

But Burberry did not disclose whether there were any layoffs.

Some analysts and investors questioned whether Burberry's CEO Christopher Bailey could effectively lead the company out of the profit gap. This plan should be able to alleviate doubts to some extent.

However, Burberry released a forecast last month that this year's earnings may be below the expected bottom line, and the pressure on Christopher Bailey is getting heavier and heavier.

Paul Thomas, an analyst at Retail Remedy, a consultancy, said: "Christopher Bailey, which was last year's CEO and chief creative officer, looks amazing. But this year there may be some dramatic changes. Creating new demand has become the core of Burberry's future strategy."

Analysts expect the pre tax profits to range from 375 million to 449 million pounds. After the company's two consecutive annual profits fall, Royal Bank of China capital market analyst Rogerio Fujimori has cut about 9% of Burberry's future profit forecast.

The company's chief financial officer, CarolFairweather, said at a conference call that Burberry plans to cut 15% to 20% product categories.

Burberry will focus on marketing rather than new product development next year as a handbag for the company's turnover.