Burberry shifts strategy towards ultra-luxury positioning

Burberry has announced plans to “establish its position firmly in luxury” in order to “play in the most rewarding, enduring segment of the market.” The company said:  “to win with this consumer, we must sharpen our brand positioning [and] change our approach to product, communication and customer experience.”

The firm’s consolidation of the Prorsum, London and Brit labels into one Burberry power label has left it with a wider range of price points than luxury rivals like Louis Vuitton or Gucci.

On Thursday, Burberry added it focused on how much “the sector has changed and [how] the luxury consumer demands innovation, curation and excitement from brands and creativity at every turn.”

Without going so far as to say that it will eliminate cheaper price points, it said: “we will reshape our offer, increasing and invigorating the fashion content [with] compelling luxury leathergoods and accessories to attract new customers. We will build on the strength of our apparel and re-energise it. We will build our offer to provide a complete look for our customers, while continuing to simplify our ranges.”

The words ‘fashion content’ and ‘simplify’ could be key here for anyone seeking clues about the future of Burberry’s offer and means we’re likely to see a company with a much more fashion-focused and unashamedly luxe product line-up in future aimed at “returning top-spending customers”

The company said it also expects to put product at the centre of its communication, to leverage its “extensive digital reach to convey new energy” and to “be bold in the way we engage luxury consumers, reinventing our editorial content and experiences.”

To ensure distribution is consistent with the brand positioning, it said it will “rationalise” non-luxury wholesale and retail doors, starting with the US and then EMEIA. It will “transform” the in-store experience by revamping stores and “enhancing our luxury service.”

The firm turned in a strong set of results for the first half ended September, hailing the strength of fashion-focused product, the return of those “top-spending customers” as well as “a significant improvement in Beauty profitability.”

The results underlined the logic of the firm’s new strategy as revenue rose 4% underlying or 9% reported to £1.263 billion. Retail comp sales rose 4% and improved further in Q2. And the adjusted operating margin was up 210bps to 14.6% while adjusted operating profit rose 17% underlying and 28% reported to £185 million.

The strength of retail was hugely important during the half as it accounted for £944 million of the group’s revenue total and rose from £859 million a year ago.

The recovery of Asia Pacific, where retail accounts for 90% of all sales, was notable after earlier dips and the region saw mid-single digit percentage growth. Mainland China delivered a mid-teens percentage rise, Hong Kong continued to improve, returning to growth in Q2, but Korea continued to decline, “impacted by the macro environment”.

In EMEIA, where retail accounts for 70% of sales, Burberry saw mid-single digit percentage growth, with “a slight deceleration in the UK” in Q2 “as expected.” But it still enjoyed double-digit growth in the UK with the Q2 growth slowdown being due to tough comparisons with the Brexit-induced surge of a year ago.

In Continental Europe, Italy remained soft while France and Germany improved in Q2 and in the Middle East, trading remained challenging, also impacted by the macro environment.

The Americas, where retail also accounts for 70% of sales, there was a slight decline in revenue, with a small improvement in performance in Q2 as both domestic and tourist spending remained negative.

Wholesale revenue also rose, by 7% reported or 1% underlying, to £233 million, although now that the company is tweaking its strategy, this figure might be expected to decline in future

Burberry Christmas 2017 ad campaign

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