Burberry strategy bags 3.8% rise in shares

Burberry Group CEO Marco Gobbetti is seeking to enlist investor support for his turnaround plan with a £150m share buy-back.

On Wednesday, the trenchcoat maker reported full-year sales that trailed luxury rivals benefiting from a boom in Chinese spending. The Londonbased 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 share price 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 in April is selling well globally, it said, boosting Gobbetti’s hopes of building the brand’s accessories business. Burberry closed 34 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. “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 2018, boosted by demand from China, but the rising tide has not lifted all boats. After more than a year of rapid growth for the big luxury conglomerates, Burberry, along with brands such as Salvatore Ferragamo and Tod’s, is still struggling to catch the wave.

Even as Burberry seeks to be 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 was not 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 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. It said performance was in line with guidance for the current fiscal year, and it was on track to deliver cost savings of £100m.

The share price has 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.