Burberry, the British luxury brand, is facing challenging times as the luxury market begins to slow down after the boom that occurred during the pandemic. The brand is currently experiencing difficulties in meeting its annual revenue forecast due to the worsening macroeconomic climate worldwide. Shoppers in the United States and Europe are hesitant to make high-end purchases because of rising living costs, while China is dealing with a property crisis and youth unemployment, all contributing to decreased demand for luxury goods.
Compared to its peers, Burberry is in a particularly difficult position. The brand is attempting to shift its image towards the upscale market, which becomes a challenge when consumers are becoming more selective in their purchases. With fewer shoppers visiting Burberry stores, it is crucial for the brand to convert those visits into sales. Chief Executive Jonathan Akeroyd highlights the importance of increasing the number of shoppers who make a purchase, especially at a time when the industry is seeing a decline in footfall.
To drive interest in the brand, Burberry is currently undergoing an aesthetic overhaul. The company has aggressively refurbished its stores and opened more than one per week in the first half of the year. With a total investment of nearly £89 million ($110 million), Burberry aims to create a cohesive shopping experience. The brand has also reduced its presence in department stores and focused on higher-end retailers to maintain inventory control and avoid heavy discounting that could devalue its image. Additionally, Burberry has introduced new styles and emphasized its iconic outerwear, along with a renewed focus on accessories.
Designer Daniel Lee, known for his successful turnaround efforts at Bottega Veneta, has brought a fresh perspective to Burberry. His designs incorporate British elements, with colorful dandelion prints and advertising campaigns featuring fuzzy ducklings at the forefront. Lee has reversed previous changes made by his predecessor, Riccardo Tisci, and has brought back the Equestrian Knight logo in a bright blue color.
Burberry’s leadership has ramped up investment in response to increased competition in the luxury sector. Other major players like Kering and LVMH have also signaled their intentions to heavily invest in building their brands. Burberry’s Chief Financial Officer, Kate Ferry, has assured that the company is committed to protecting its consumer-facing areas and will maintain marketing spend. The company’s costs have already increased by 10% in the first half, and spending will continue to rise in the second half.
Despite the brand’s efforts, Burberry’s shares are currently trading at their lowest level since 2009, with a price-to-earnings (PE) ratio half that of two years ago. This reflects the overall negative sentiment surrounding the luxury sector as the post-pandemic splurge comes to an end. Even larger players like LVMH are experiencing lowered forecasts. Investment bank Citi predicts that negative sentiment will likely prevail for luxury turnaround stories for the next 6-12 months.
In conclusion, Burberry’s design overhaul is happening during a challenging period for the luxury market. The brand needs to focus on converting store visits into sales as the number of shoppers decreases. Through an aesthetic overhaul and increased investment, Burberry aims to attract consumers with higher-quality and higher-priced products. Designer Daniel Lee brings a fresh perspective with his British-inspired designs. However, the luxury sector as a whole is facing challenges that may impact Burberry’s performance in the coming months.
Useful links:
– Vogue Business – Burberry strategy: turnaround dissent in the C-suite”
– Business of Fashion – “Burberry’s New Era”
