Shoppers are still splashing out on Burberry products, the luxury group maintained, despite its recent profits fall.

The retailer, which suffered a 12.5 per cent drop in pre-tax profits to £175m for the year to March 31, described the past year as the “most challenging” that the luxury sector has faced. But chief financial officer Stacey Cartwright said: “There may be less traffic and lower conversion rates, but people are still shopping.”

Burberry’s retail sales rose 14 per cent during the year, and total revenue hit £1.2bn. Cartwright said that Burberry was continuing to widen its range. Last year it opened five childrenswear stores and launched denim and sports ranges.

Cartwright also believes that retailers across the board are now in a much stronger stock position, which could lead to less discounting. “”Everyone is procuring significantly less, so people will not be left with the inventory they were left with in Christmas 2008,” she said.

Last year Burberry implemented a £50m cost efficiencies programme to help it through the downturn.

Investec analyst Katherine Wynne said: “Looking ahead, Burberry expects its cost-reduction initiatives to deliver £30m to £35m of annual savings.”

Wynne said Burberry also aims to increase gross margin by greater focus on retail, which delivers higher margins than wholesale. But she warned: “On the downside, retail is more cost-intensive.
We remain very cautious on the gross margin outlook.”