Burberry fights to fend off takeover
BURBERRY hopes to breathe life into its UK stores by making them even more luxurious as it fights back from a slump.
The FTSE 100 luxury label, which is under pressure to cut costs and ditch tired designs after appointing a new boss, is also planning to reduce its presence in US department stores.
It is also concerned about becoming a takeover target if it fails to reverse a decline following a slowdown in its sales in China.
The British brand has committed to saving £100m over three years and refreshing its range of clothes and bags.
Industry insiders have already touted Burberry, whose ad campaigns feature model Cara Delevingne (pictured), as potential prey for rivals such as Louis Vuitton-owner LVMH, and it is thought to have considered a tie-up with handbag-maker Coach.
Marco Gobbetti, from French luxury brand Celine, has been brought in as chief executive to replace long-time design boss Christopher Bailey in a bid to revive sales.
Bailey, 45, is relinquishing the role and will remain as chief creative officer – although one key move is likely to see Burberry bring in fresh designers to revamp its products.
The overhaul has followed disappointing results as the company grappled with a decline in luxury spending. Last July it reported a 3pc fall in sales and flat revenues of £423m in the first quarter.
Despite the decline, Bailey managed to hold on to his job but is under pressure to deliver the much-needed overhaul.
Gobbetti is initially serving as executive chairman of Asia Pacific and the Middle East until July 4, when he will become chief executive and join the board.
Much is expected, particularly as rival Gucci saw revenue jump 21pc in the last quarter of 2016 after it brought in designer Alessandro Michele.
Halting poor sales in the US is a focus after a slowdown in department store spending.
Burberry is seeking to streamline its presence in department stores in the US, which often slash prices at the end of the sea- son, diluting Burberry’s luxury image. While American shoppers do buy Burberry clothes, many opt to travel to Europe to make their purchases.
In the UK, Burberry is upping its focus on big spenders by boosting its army of sales assistants for VIPs in stores.
It is hoped by improving its shops, Burberry will reinforce its luxury brand position. Narrowing its range by 15pc to 20pc and cutting jobs will also save money, and refocus the brand.
It is one year through a threeyear turnaround, and in January reported a 22pc rise in thirdquarter revenue to £735m, with same-store sales up 3pc. UK sales rose 40pc and it reported an improvement in global spending from US shoppers. Part of this was an injection from the fall in the pound since Brexit, with shares up 55pc since Britain voted to leave the EU.
Rich foreigners have also flocked to London for a post-Brexit luxury- goods bargain, plumping sales in Burberry stores.
And last autumn also saw the debut of Burberry’s ‘see-now-buy-now’ catwalk collection – the first time shoppers could pick up clothes straight off the catwalk.
Burberry reports a half-year trading update next month.
Tom Gadbsy, analyst at Liberum, said while Burberry was not immediately under threat, it could become a takeover target in the longer term if its turnaround failed to come off.