Burberry puts focus back on trench coats in turnaround plan

11/14/2024

2 minutes read

2024.11.14 04:59

By Helen Reid

LONDON (Reuters) -Burberry will use its British heritage appeal to win back customers by focusing on trench coats and scarves and be less ambitious with prices on bags and shoes, the loss-making luxury brand said in a revamp that sent its shares up sharply.

New CEO Joshua Schulman laid out his turnaround plans on Thursday after Burberry (LON:) reported a loss for the first half of its financial year and announced a 40 million pound ($50.67 million) cost savings programme.

The group’s shares surged more than 14%, putting them on course for their biggest one-day gain since March 2020. They are down more than 40% so far in 2024, including Thursday’s rally.

Burberry, like other luxury goods companies, has had a tough time as consumers’ appetite for luxury fell in China and elsewhere, but the retailer has lagged in the industry-wide slowdown.

Schulman, previously CEO at Coach (NYSE:) and Michael Kors, is Burberry’s fourth CEO in a decade, and the brand has also had three creative directors in the last seven years, each bringing new styles and logos that confused the brand identity.

“Over the past several years, we moved too far from our core with disappointing results,” Burberry said. “Our product was weighted to seasonal fashion with a niche aesthetic obscuring our more timeless core collections.”

PRICING STRATEGY SHIFT

Schulman told reporters Burberry would add more lower-priced “entry-level” products to its range as part of a pricing shift. He acknowledged that price hikes had gone too far, and said the brand had the most pricing power in outerwear while it has less in handbags.

“It is only in the recent 18 to 24 months that we really were trying to stretch our pricing on absolutely every product,” Schulman said, adding that he sees opportunities in handbags priced under 2,000 euros ($2,109.00), with a “sweet spot” at 1,600 euros.

But he said Burberry’s positioning would remain in luxury and there were no plans to make it an “accessible” luxury brand.

Burberry’s creative director Daniel Lee, who joined the brand two years ago, had made his name at Bottega Veneta with a series of top-selling “it” shoes and bags. But his designs at Burberry, which is not primarily known for leather goods, have not found the same success.

Leather goods and shoes underperformed in the first half, Burberry said, while outerwear did better than average.

Burberry made an adjusted operating loss of 41 million pounds in the first half and said it was too early to tell, with the festive period ahead, whether it would make a profit for the full year.

Sales in Burberry’s second quarter ending Sept. 28 fell at the same pace as the first, with revenue for the first half down 20% in constant currencies.

Asia Pacific was the weakest region in the second quarter with sales down 28%, while sales in the Americas fell 18% and Europe, Middle East, India and Africa declined by 10%.

Burberry is widely seen as a takeover target. Recent media reports that Italy’s Moncler was preparing a bid had boosted the stock, but sources close to the matter denied any talks were underway.

Schulman, asked if Burberry was for sale, told reporters he would not comment on speculation, but added that Burberry’s independence – separate from a luxury conglomerate – was an asset.