Burberry reveals new strategy following successful six months

Burberry reveals new strategy following successful six months

Burberry’s first six months were very successful: turnover grew 9 % and the operational profit even shot up 28 %. Nevertheless, its share was punished, because investors have reacted skeptically to CEO Marco Gobbetti’s new strategy announcement.

1.3 billion euro turnover

“I am pleased with our performance in the half with strong double-digit underlying profit growth. Consumers responded positively to fashion and newness, particularly in rainwear and leather goods. Digital revenue grew in all regions, led by mobile, while growth was strongest in our own stores in Asia Pacific,” CEO Gobbetti said.

 

The British fashion group, which announced creative director Christopher Bailey’s departure last week, can indeed be happy with its strong first six months: turnover grew 9 % to 1.2 billion pounds (1.3 billion euro) and operational profit even shot up 28 % to 185 million pounds (200 million euro).

 

“Luxury player” more than ever

CEO Gobbetti also announced a new strategy, focused on “luxury” more than ever. “Now is the right time for Burberry to implement the next phase of its transformation.  By re-energising our product and customer experience to establish our position firmly in luxury, we will play in the most rewarding, enduring segment of the market,” the CEO said.

 

According to this strategy update, Burberry aims to increase its product range with luxury leatherwear and accessories to present the customer with a complete look. Burberry also said it wants to go digital and put its products center stage. Gobbetti also wants to position the brand as a more exclusive brand, which means that wholesalers and retailers that do not fit its luxury label will be “rationalized”, starting with the US market.

 

Additional marketing efforts and investments to modernize its current store network will obviously cost money. The CEO has factored in a 15 million pound (17 million euro) restructuring cost for 2019. Burberry targets a “stable turnover and operational profit margin” for 2019 and 2020. If there is anything investors do not like to hear, then it is exactly that. They sent the share down 14 % and the share barely recovered, as it still stood at a 9 % loss at 16h30.