Burberry's new logo-strewn design is a surprise hit
By Sarah White - Jul 16th, 14:49
Strong demand for designer Riccardo Tisci’s new fashion ranges helped revenue at British label Burberry grow faster than expected in the first quarter, sending its shares soaring as a high stakes overhaul showed early signs of promise.
The luxury brand said sales to Chinese consumers, in particular, had picked up, boosted in part by younger shoppers’ response to its revamped, logo-strewn products. It had previously lagged rivals’ performance among this key clientele.
Burberry shares were up 13.1% at 10.01am GMT, on course for their best day in seven years.
Other luxury stocks also outperformed the pan-European Stoxx 600, including Hermès, Louis Vuitton owner LVMH, and Gucci parent Kering, which are due to report sales for the April to June period next week against the backdrop of enduring US-China trade tensions.
More than a year after CEO Marco Gobbetti hit the re-set button on Burberry in a bid to promote a more upmarket image, the plan faced its biggest test yet with new Tisci products accounting for half the wares on offer in its shops by the end of June.
So far, his edgier twists on classic Burberry products such as the trench coat, appear to have struck a chord.
Same-store sales rose by 4% in the period, topping market expectations of about 2% after lacklustre growth of 1% in the previous three months. “The consumer response was very promising, delivering strong growth in our new collections,” Gobbetti said in a statement.
CFO Julie Brown told reporters that items such as the new monogram collection — based on a new logo-style print in a step away from Burberry’s camel, red and black check trademark — had sold well with millennials, or roughly 23 to 38-year-olds, from China.
The redesign, with a pattern of interlocking “Ts” and “Bs” from the initials of founder Thomas Burberry, was a gamble in an industry saturated with logos at a time when brands are jostling for visibility, especially on social media.
Burberry is also experimenting with monthly product launches on platforms such as Instagram, in line with rivals trying to keep younger shoppers hooked by turning over collections more rapidly. One of these “drops” in April, a black leather pair of pull-on puff sleeves, sold out in 20 minutes globally, Brown said.
Despite the buzz, Burberry still has some way to go in its turnaround. “It remains to be seen whether the commercial success of Burberry’s new brand identity can be sustained throughout the remainder of the year on a much larger share of the offering,” Citi analyst Thomas Chauvet said.
About 75% of all products in Burberry stores will be Tisci designs by March 2020.
Even as its first-quarter exceeded forecasts, the company maintained its goal for broadly stable revenue and operating margin at constant exchange rates for the 2020 financial year. It said markdowns on clothing and other items towards the end of its financial year would be less than in the previous 12 months, weighing on same-store sales growth.
The brand is also closing some stores and overhauling others, as well as withdrawing from some US department stores that don’t fit with its attempt to build a more upmarket image.
Britain’s looming exit from the EU presents another challenge and the company is preparing for the possibility of a no-deal Brexit that would disrupt its supply chains, Brown added.
Like its peers, Burberry is also exposed to trade-war ructions and slowing economic growth in China, though neither appears to be derailing luxury goods sales for now.
Recent street protests in Hong Kong had a small effect on local sales with some stores closed for five days in the past quarter, but this “did not have a material effect at group level”, Brown added.
Checkers brings world-class retail to Constantia with new flagship store
27/11/2019 - 13:01
Checkers has opened the doors to its state-of-the-art 2 330 m² flagship supermarket at the Constantia Emporium as the retailer continues to take innovation to new heights.
Woolworths carves out market share in SA
27/11/2019 - 10:11
In Australia, David Jones's sales declined 2.1%, with the company saying a store refurbishment contributed to the decline.
Push and pull strategies work together to keep consumers coming back for more
26/11/2019 - 10:20
The retail sector is under increasing pressure as consumers have shrinking disposable income in a strained economy. Maintaining share of wallet is critical. Relying solely on a push route to market strategy from manufacturers into retailers is not enough to get consumers buying products. A pull strategy needs to coexist with the push to drive brand consumption. Integrating these strategies requires intelligent and insightful decision-making. This, in turn, requires data generated through smart technology which provides line of sight across the value chain from manufacturer to distribution, retailer to the consumer.
Exclusive leases must fall: Commission cracks whip on Shoprite, Pick n pay, Spar, Woolies
26/11/2019 - 09:57
The Competition Commission Inquiry into Grocery Retail, published on Monday, called for an end to the exclusive leases negotiated by national retail chains in all shopping malls across the country in a bid to open up access to markets for smaller players.
Today’s customers are loyal to speed and convenience, not brands
25/11/2019 - 11:15
Consumer expectations are rapidly shifting as technologies such as mobile, geolocation, social media and increasingly, Internet of Things devices and wearables, connect people to a world of easily accessible information and convenient services. With the ability to browse, compare and order with a few swipes and taps, consumers are becoming trained to value convenience and service above nearly anything else.