Shares in Burberry dropped by over 6% after the firm reported a 2.5% drop in its revenue in Europe and the Middle East to £821m in the year to 28 March.

In this period, the fashion brand’s revenue dropped by 2% to £2.42bn, while its operating profit jumped by 528% to £160m.

Furthermore, its free cash flow increased by 120% to £141m, and it returned to a profit before tax of £49m, following a loss of £66m in the previous financial year.

The firm said that across the year, it returned to comparable sales growth, with sequential improvement throughout the year, with particular strength in Greater China and Americas, which saw double digit growth in Q4.

Burberry said this performance was driven by "reignited brand momentum with improve cultural relevance", an enhanced in-store experience and double-digit growth in its outerwear and scarves in H2.

Across this period, the fashion retailer has achieved £80m in operating expenses (opex) savings, with continued investment in growth-driving initiatives, including marketing.

Chief executive officer at Burberry, Joshua Schulman, stated: "This financial year marks a meaningful inflection point for Burberry. We’ve returned to profitable comparable sales growth, with a strong fourth quarter driven by momentum in Greater China and Americas. Our strategy is working and there are clear opportunities for further growth."

In its outlook, Burberry said it is encouraged by this year’s progress and it will build on this to drive performance and deliver sustainable long-term value.

As a result, its wholesale revenue is set to grow by mid-single digits in H1 FY27, with opex savings are expected to be £100m by the end of the year, following the £80m delivered in the previous financial year.

However, it did state that it is mindful of the uncertain geopolitical and macroeconomic environment and its potential impact on consumer confidence.

Head of markets at AJ Bell, Dan Coatsworth, stated that although there was strong growth in Q4 in the North American and Chinese markets, "investors were spooked" by a weaker performance in the Middle East and Europe, as well as a "gloomy tone to the outlook".

He concluded: "Schulman didn’t try and dress up the macroeconomic situation, as the Iran war hits tourism and puts spending on discretionary items under pressure. Management’s decision to continue the freeze on dividend payments is another indication of their caution about the immediate prospects for the business.

"This conservatism, while poorly received today, may help in the longer term if it keeps expectations in check. However, given the miserable experience Burberry shareholders have endured in recent years it seems they were looking for a bit more sunshine alongside the rain."

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