Now Burberry plans to go even more upmarket

As new boss declares £400 handbag is too cheap . . .

BURBERRY’S new boss is taking the brand further upmarket by closing stores and axing products that aren’t luxurious enough.

Marco Gobbetti said Burberry would increase the price of ‘ undervalued’ products and ramp up production of luxury bags to attract customers.

The announcement caused shares in the 161-year-old retailer to plummet 9.9pc, despite reporting a 17pc jump in half-year profits to £185m and a 4pc rise in sales to £1.3bn.

The strategy shift comes a week after ex- chief executive and creative officer Christopher Bailey announced that he would be leaving after more than 17 years at the company.

Under the plan, Burberry will close stores that don’t meet the high standard the brand demands.

The programme will cost around £15m and will mainly affect its wholesale business, which predominately consists of outlets in department stores.

The division makes up around 30pc of the group’s sales.

Instead, Gobbetti said Burberry will ensure its stores are next to luxury rivals, to ensure they attract the right customers. He said: ‘Cus- tomers buy trench coats from us. They may buy a handbag from another brand that is in the same segment of the sector. That’s where we want to play.’

The firm gave no detail on which or how many of its stores would close or how many jobs would be lost as a result.

The second part of Gobbetti’s restructure involves increasing production of high- end leather bags and goods.

He said the plan was not about replacing goods but ‘evolving’ products it feels are undervalued in order to ensure it competes squarely in the luxury sector.

The new chief said: ‘It’s going to be firmly luxury, but we are already playing in that space.

‘What I’m trying to say is this is not a movement. This is not a brand that is sitting in accessible luxury and saying “now OK let’s change this we want to play in the luxury space.” We’re already there.

‘The prices of our trench coats are £2,000 – that’s not accessible luxury. The prices of our leather handbags are not £400, they are £1,000. There are categories where we think our pricing does not represent us in value and is under what we consider are our luxury peers.’

He added: ‘ Where we have items that have a good perceived value and we’re underpricing, we will intervene and correct those pricing.’

Gobbetti, who took over in July, earned a reputation for being ruthless while at high-end rival Celine, where he closed more stores than he opened.

Immediately after arriving at Burberry he was reportedly embarking on visits to each of the retailer’s 498 retail stores in order to determine what changes needed to be implemented to revive the company’s fortunes – particularly in the United States where business has been hit by a downturn in department stores.

Gobbetti said: ‘I had an idea of what Burberry was before I joined but I was informed by my knowing and getting to know the business.

‘Touring the stores clearly gives you enormous information, but it’s not only about the physical location of the store, but the customers and seeing who is there.’

‘I certainly did not come here with a strategy that I’d written down on a piece of paper.’