British fashion brand Burberry said this morning that it will not pay a full-year dividend as it revealed that fourth quarter sales plunged due to coronavirus lockdowns around the world.
The luxury retailer said sales in the fourth quarter were down 27 per cent and 60 per cent of its stores were closed at the end of March. Sales were up four per cent in the first nine months of the year.
Burberry will take a £245m hit on store impairments and stock provisions related to the coronavirus pandemic.
However, the company said sales in China and Korea were ahead of last year and were “continuing to show an improving trend”. Burberry shares were up 2.84 per cent this morning.
Burberry chief executive Marco Gobbetti said: “It will take time to heal but we are encouraged by our strong rebound in some parts of Asia and are well-prepared to navigate through this period.”
The Share Centre investment research analyst Helal Miah said investors were expecting dividend cuts during the crisis, and that the recovery in China and Korea would provide some optimism.
“It has been turbulent year for Burberry mainly due to external factors,” Miah said.
“While it handled the disturbances from the Hong Kong protests well, there was no way of skipping around the Covid-19 outbreak which first hit the Far East, one of its most important markets.
“Despite a dividend cut, investors have now priced this in as now the norm and some encouragement will be taken from the most recent update on trading activity in the Far East where April sales are ahead of the prior year.”
Julie Palmer, partner at Begbies Traynor, added: “The business relies heavily on the Asian market, accounting for a significant amount of the company’s sales, but with the country under lockdown in recent months and widespread political protests in Hong Kong putting a halt to plans, spending has plummeted.
“As retail stores in China begin to reopen though, investors will be hopeful that sales can start to recover. “