British fashion brand Burberry has reported a fall in annual profits amid a “challenging” trading environment, particularly in the US and Hong Kong.
Pre-tax profits for the year to 31 March fell 5% to £394.8m as it was hit by weak wholesale trading in the US.
However, tourists attracted by the low pound helped to drive an “exceptional” performance in the UK.
The results are the last before Christopher Bailey stands down as the company’s chief executive.
Mr Bailey will continue in his role as chief creative officer, but Marco Gobbetti will take over as chief executive in July.
“2017 was a year of transition for Burberry in a fast changing luxury market,” Mr Bailey said.
“The actions we have taken to lay the foundations for future growth are yielding early benefits and I remain confident that these will build over time.”
Burberry – best known for its trench coats and distinctive check pattern – has been revamping its product line and online store, as well as cutting costs.
In addition, it said earlier this year that it was going to stop developing its fragrance and beauty products in-house and franchise the business to US cosmetics group Coty.
Burberry said it had cut costs by £20m in the past year, and was on target to achieve a further £50m of savings in 2018 and at least £100m by 2019.
Earlier this month, it announced it was relocating 300 jobs from its London offices to West Yorkshire as part of the cost-saving measures.
Revenues for the past year were £2.8bn, down 2% when adjusted for currency fluctuations. Burberry said a key revenue driver was its new DK88 handbag, which was attracting younger buyers.
Steve Clayton, manager of the HL Select UK Shares fund, which holds shares in Burberry said: “Despite all the difficulties of the last few years, cash flow has held up throughout, underlining the attractions of the stock.
“Cash flow was strong, with Burberry generating £465m of free cash flow during the year, allowing it to buy back £100m of shares and still see net cash balances rise £149m to £809m.”