Despite a declining turnover, Burberry wants to offer fewer discounts in the near future. The luxury retailer is determined to guard its brand image as the company is attracting new customers in China, South Korea and the United States.
Long term profit
When presenting the half-year results, the UK retailer stated that fewer products will be discounted in the future. The sale will also start later and be shorter, writes the FT. In other words, the company is sacrificing revenue in the short term to preserve its luxury brand image and increase profitability in the longer term. Indeed, profits are under severe pressure from the corona crisis and fell 56% to 88 million pound (98 million euro) in the first six months of the broken fiscal year.
Burberry knows that the new strategy will come at a cost. Sales will drop in the coming months, but it is a price the retailer is willing to pay. "Now that the brand is rebounding and attracting new and younger consumers, we have decided to reduce price cuts," the company said in a press release. "This will put a brake on revenues, but it will serve the long-term interests of the brand".
Burberry has seen demand pick up again in recent months, particularly in China, South Korea and the United States. While sales plummeted during the spring months (-45%), growth was recorded again in October. Nevertheless, for the period whole period of April-September, turnover fell by 31% to 878 million pound (978 million euro). Like other luxury brands, the company is particularly dependent on tourists and sales in physical stores.