Big in China

Chi­nese shop­pers have been vacu­um­ing up Burberry B Se­ries T-shirts and hood­ies, which have been land­ing in monthly drops on WeChat and In­sta­gram.

WWD Digital Daily - - Front Page - BY SAMAN­THA CONTI

Burberry prof­its surge

on Asian de­mand.

LON­DON — Chi­nese shop­pers can’t get enough of Ric­cardo Tisci’s take on Burberry, shop­ping around the clock for the brand’s B Se­ries T-shirts and hood­ies which have been land­ing on­line as lim­ited- edi­tions since Septem­ber, with the next one set for Nov. 17.

The brand, which on Thurs­day re­ported a 42 per­cent surge in first-half prof­its and a small dip in sales, said Tisci’s B Se­ries had ex­ceeded ex­pec­ta­tions, with Chi­nese cus­tomers driv­ing de­mand.

The first B Se­ries, which dropped shortly be­fore Tisci’s de­but Lon­don Fash­ion Week show in Septem­ber, sold out within four hours, the sec­ond one was gone in a few hours and the third, de­spite land­ing at

1 a.m. lo­cal time in China, dis­ap­peared within one hour.

Then there was the one-off scarf that Burberry cre­ated for Tmall on Sin­gles’ Day. That flew out quickly, too. Go­ing for­ward, the B Se­ries prod­uct drops will also be avail­able on Kakao in Korea and Line in Ja­pan.

“The fun­da­men­tals are still strong in China,” said chief ex­ec­u­tive of­fi­cer Marco Gob­betti dur­ing Burberry’s in­terim re­sults pre­sen­ta­tion at the brand’s Horse­ferry House head­quar­ters on Thurs­day.

“Chi­nese con­sumers move very of­ten, they’re in­flu­enced by fluc­tu­a­tions in cur­rency, but they con­tinue to shop. They may be shop­ping less in Lon­don, and more in Hong Kong or in Seoul, but at this stage we don’t have any sig­nif­i­cant in­di­ca­tors that there is any slow­down in Chi­nese na­tion­als’ shop­ping pat­terns.”

In the six months ended Sept. 29, Burberry said the Asia-Pa­cific re­gion grew by a mids­in­gle-digit per­cent­age. Growth was fu­eled by Main­land China (which grew in the low sin­gle dig­its) and by Chi­nese spend in Asian tourist des­ti­na­tions such as Hong Kong and Korea. The uptick in sales came de­spite the prob­lems per­co­lat­ing in China such as tighter bor­der con­trols, a trade dis­pute with the U.S. and a slow­ing econ­omy.

The com­pany called the Chi­nese con­sumer “vi­tally im­por­tant,” and added that the coun­try would ben­e­fit the most from the big store open­ings that Burberry is plan­ning for 2019. The com­pany de­clined to give more de­tails about the new Chi­nese stores.

The Amer­i­cas re­gion also grew by a mids­in­gle-digit dur­ing the six months, while the Europe and the Mid­dle East re­gion was flat year-on-year.

Burberry has boosted its geo­graphic reach to 150 coun­tries from 45 coun­tries via a new deal with Far­fetch, which has ac­cess to 100 per­cent of the brand’s in­ven­tory.

Burberry added that Asia, its largest sin­gle mar­ket, still of­fers a golden op­por­tu­nity for growth. Gob­betti called out Ja­pan in par­tic­u­lar, re­fer­ring to the mar­ket as an “op­por­tu­nity and a pri­or­ity. We have been un­der-dis­trib­uted there, and we’ve been catch­ing up very quickly,” he said.

B Se­ries, where T-shirts sell for 350 pounds on plat­forms such as In­sta­gram and WeChat, is just one of Gob­betti’s strate­gies to ad­dress a cu­ri­ous - and im­pa­tient - cus­tomer base. Go­ing for­ward, he said, sales will be all about agility and keep­ing cus­tomers’ in­ter­est piqued in be­tween the run­way col­lec­tions.

Burberry has also moved on from see-now, buy-now in fa­vor of timed prod­uct drops; lim­ited edi­tion, sea­sonal or themed cap­sule col­lec­tions, and a store en­vi­ron­ment that can be put up, pulled down and switched around. “There are no fixed rules. It’s about agility and new­ness,” he said of the store in­te­ri­ors.

Tisci’s first run­way out­ing won’t land un­til Fe­bru­ary, so in ad­di­tion to the B Se­ries drops, which ar­rive each month on the 17th, the de­signer’s lucky num­ber, there is a De­cem­ber cap­sule col­lec­tion with Vivi­enne Westwood planned, while hol­i­day and Lu­nar New Year de­liv­er­ies are also on the way.

“For me, this is the next fron­tier from the see-now, buy-now, which was clearly go­ing in the di­rec­tion of the con­sumer,” Gob­betti said. “But see-now, buy-now be­came static: It was in the stores early and then it stayed in the stores for three months. It didn’t bring nov­elty. The im­por­tant thing is to cre­ate nov­elty for the con­sumer, very of­ten. Right now this [multi-di­men­sional way of sell­ing] looks like a very in­ter­est­ing model for us. It’s not with­out its com­pli­ca­tions, but so far, so good.”

For the B Se­ries in par­tic­u­lar, Gob­betti said the col­lec­tions are de­lib­er­ately lim­ited in size and their pur­pose is to fire up heat around the brand rather than drive sig­nif­i­cant sales vol­umes.

In the first half and de­spite the fact that Burberry has only be­gun its multi-year trans­for­ma­tion un­der new man­age­ment, rev­enues held steady, dip­ping 3.4 per­cent at cur­rent ex­change rates and 2 per­cent at con­stant ex­change to 1.22 bil­lion pounds.

Strip­ping out the im­pact of the beauty busi­ness, which was for­merly in-house and is now a li­cense with Coty, rev­enues in the six months were up 3 per­cent at re­ported ex­change and 4 per­cent at con­stant rates.

Prof­its shot up 42 per­cent to 132 mil­lion pounds as Burberry kept a tight lid on costs and saw un­ex­pect­edly strong whole­sale rev­enue growth. Both the profit and rev­enue fig­ures beat an­a­lysts’ pro­jec­tions and Burberry shares closed up 3.2 per­cent at 18.73 pounds on Thurs­day.

Whole­sale is now ex­pected to be up by a mid-sin­gle digit per­cent­age in the full year thanks partly to lux­ury ac­counts, some of which have been dou­bling or­ders on last year, and to duty free and travel re­tail sales in Asian tourist des­ti­na­tions. Gob­betti, who has been clean­ing up Burberry’s whole­sale port­fo­lio with an eye to se­cur­ing lux­ury po­si­tion­ing for the brand, said that all of those ne­go­ti­a­tions have been com­pleted.

Both Gob­betti and Julie Brown, the com­pa­nyy’s chief op­er­at­ing and fi­nan­cial of­fi­cer, also of­fered up some in­sights into how cus­tomers are buy­ing the brand be­yond the T-shirts.

At con­stant ex­change, men’s ap­parel grew 6 per­cent in the pe­riod, fol­lowed by women’s ap­parel at 3 per­cent and ac­ces­sories at 2 per­cent.

Brown said Burberry’s strat­egy to out­fit the client head-to-toe was work­ing well, with dou­ble-digit growth in tops and trousers. Car coats and quilted jack­ets per­formed bet­ter than the trench in the pe­riod, she said, as fash­ion moves to­wards sin­gle-breasted styles.

Gob­betti added that Burberry isn’t putting too great an em­pha­sis on cus­tomer age. “It is one of the com­po­nents we look at, but there are sev­eral other be­hav­ioral in­di­ca­tors we look at, also. Hav­ing said that, I think we have an op­por­tu­nity to in­crease sales with some age groups, and Mil­len­ni­als are one of them. Par­tic­u­larly our Chi­nese cus­tomers, and we’ll be do­ing that go­ing for­ward, which is why the B Se­ries is im­por­tant for us.”

B Se­ries, he ar­gued, is age­less. “T-shirts and sweat­shirts - this is how peo­ple dress to­day. It’s not an age thing, but a cat­e­gory in it­self,” Gob­betti said.

For the full year, which ends in March, Burberry said li­cens­ing rev­enue will rise by 15 mil­lion pounds, in­clud­ing beauty, with that fig­ure partly off­set by the non-re­newal of the watch li­cense.

Burberry added that it’s ex­pect­ing to re­port cu­mu­la­tive cost sav­ings of 100 mil­lion pounds in fis­cal 2018-19, 36 mil­lion pounds more than in the pre­vi­ous pe­riod.

Gob­betti also ad­dressed Burberry’s plans post-Brexit, al­though he wouldn’t be drawn on too many de­tails. “We are plan­ning for var­i­ous dif­fer­ent sce­nar­ios, and we are look­ing very se­ri­ously at the im­pact, the com­pli­ca­tions and the fi­nan­cial and lo­gis­ti­cal prob­lems that it could po­ten­tially bring. A good Brexit deal is what we are hop­ing for,” he said.

Burberry said in a sep­a­rate state­ment Thurs­day that it had made some changes to the board, with Ron Frasch be­com­ing a mem­ber of the au­dit com­mit­tee this month and Matthew Key tak­ing a seat on the re­mu­ner­a­tion com­mit­tee.

The Thomas BurberryMono­gram T-shirt.

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