Burberry to enlist investor support for CEO's turnaround plan
By Robert Williams and Thomas Buckley - May 17th, 10:45
Burberry chief executive officer Marco Gobbetti is seeking to enlist investor support for his turnaround plan with a £150m share buyback.
The trench-coat maker reported full-year sales that trailed luxury rivals benefiting from a boom in Chinese spending.
The London-based company is looking to join its peers by seeking a more exclusive image under new creative director Riccardo Tisci, who is set to show his first collection in September.
The shares rose as much as 3.8% after Burberry said it saw signs that the new strategy was paying off. A $2 000 “Belt” handbag introduced last month is selling well globally, the company said, boosting Gobbetti’s hopes of building the brand’s accessories business.
Burberry closed 34 retail stores during the year while opening 14 new ones in better sites.
“Our focus is on getting the right brand positioning,” chief financial officer Julie Brown said on a call. “It’s about getting Burberry in the right locations next to top luxury players.”
Rivals LVMH and Kering both grew by double-digit percentages at the start of the year, boosted by demand from China, but the rising tide hasn’t lifted all boats. After more than a year of rapid growth for the big luxury conglomerates, Burberry, along with brands like Salvatore Ferragamo and Tod’s, is still struggling to catch the wave.
Even as Burberry seeks to become a bigger player in luxury goods, by discontinuing its most affordable range of polo shirts and seeking more exclusive store addresses in cities such as London and Shanghai, Gobbetti said the trench-coat maker isn’t aiming for the very top end of the market, where rivals are difficult to displace.
“We are not interested as of today to play in the highest level of offer,” the CEO said during a media event at Burberry’s London headquarters.
“Frankly speaking, Hermes, Chanel, these types of brands are brands that are set at a level that is very special and I think they’re fantastic brands.”
Burberry’s sales rose 3% in the year ended March 31. The company said performance was in line with guidance for the current fiscal year, and it said it was on track to deliver cost savings of £100m.
The shares have rallied 15% since Tisci’s appointment in late February, despite dropping 6% last week when it was disclosed that Belgian billionaire Albert Frere dumped his stake.
As the longtime designer of LVMH’s Givenchy, Tisci pioneered mixing high-end fashion with athletic-wear while also creating intricate red-carpet gowns favoured by Beyonce and Kim Kardashian.
“His skill in blending streetwear and high fashion is highly relevant to today’s luxury consumer,” Gobbetti said of Tisci in a presentation to investors.
Gobbetti’s efforts to boost the brand’s high-end accessories business includes the move this week to acquire a leather-goods supplier in Italy for an undisclosed sum. The factory will create prototypes and coordinate accessory production with external suppliers, Burberry said.
Customers got an early taste of Tisci’s vision for the brand when Burberry released its first ad campaign styled by the designer last week. The images feature trenches, checkered ponchos and the new Belt bag on androgynous models whose faces are hidden from view.
“The bull case is that this Italian duo will succeed in bringing the mojo back to Burberry with a greater presence in higher-margin leather goods and higher retail efficiency,” RBC analyst Rogerio Fujimori said. Fin 24
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