Burberry shareholders will receive a payout equal to pre-pandemic levels after the luxury retailer reinstated its dividend, following strong recovery in its core markets.
The designer brand said this morning that it will reinstate its full-year dividend at 2019 levels of 42.5p “on the back of strong cash generation”.
In the year ended 27 March 2021, Burberry reported a 10 per cent decline in revenue due to the impact of store closures and a lack of tourism.
Underlying profits dropped 12 per cent to £366m against £414m in the previous year.
However, it saw a strong recovery in the second half as sales rebounded by eight per cent.
Meanwhile, in the fourth quarter store sales soared 32 per cent as trading bounced back as Covid restrictions were lifted.
Despite the green shoots of recovery, the retailer was leading the FTSE 100 fallers this morning after it warned that operating margins will be hit by increased investment and costs normalising in the new financial year.
Burberry’s share price dropped 8.44 per cent 1,926.5p following the market update.
Russ Mould, investment director at AJ Bell, said: “The market can be so short-sighted at times, fretting about near-term issues that could actually create benefits longer term.”
He added: “It needs to spend money now to make more money down the line which is perfectly normal business practice. The market doesn’t see it that way, hence the negative share price reaction.
“Expectations have been very high for Burberry to prosper in 2021 and 2022 as a wealth of pent-up demand is unleashed, creating a massive spending boom with luxury goods being an obvious beneficiary.
“It is still feasible to expect this to happen, although there remains uncertainty over the pace of Asia’s tourists being able to get back on planes to travel to other parts of the world and spend big on items such as those offered by Burberry.”