Burberry doubles down on Britishness for 'next phase', Lola bag is best seller
Burberry is entering “the next phase”, the luxury company said when delivering its interim results on Thursday, with still-new CEO Jonathan Akeroyd preparing for an evolved approach under ex-Bottega Veneta design supremo Daniel Lee.
The results looked reasonably good (more of that later), but most interesting was what Akeroyd said about the strategy.
“Burberry has an extraordinary legacy, a unique British heritage and a very strong platform to build on. Our focus in this next phase is on growth and acceleration. We have a clear plan to achieve this… and realise our potential as the modern British luxury brand. I am excited about what we can achieve in pursuit of our long-term ambition to reach £5 billion in revenue.”
The key elements are first and foremost to “harness the power of our brand, informed by a new creative vision set by Daniel Lee”. The company will double down “on Britishness and strengthen our connection with British design, craft and culture” and “amplify our brand through strong marketing and communication activations with high levels of impact”.
The aim is also to “bring all product categories to full potential”. That means doubling sales of leather goods, shoes and women's ready to wear and growing outerwear by around 50% in the medium term. Its ambition is to “grow accessories to more than 50% of group sales in the long term”.
It also wants to “accelerate customer acquisition, strengthen our relationship with customers and drive loyalty and retention”, while converting all stores to its new concept by end-FY26 and boosting sales densities by more than 50% to £25k per sq m.
And of course, it aims to double e-commerce revenue to reach around 15% of retail sales in the medium term.
The focus on Britishness is certainly interesting and something that would have been harder under the previous creative chief and CEO who are both Italian.
And the intention to supercharge categories such as accessories makes good commercial sense, given their strong margins.
While the process has already begun, the fruits of this strategy remain in the future. So what of the past, more specifically the first half?
Burberry said the 26 weeks to 1 October saw revenue rising 11% to £1.345 billion, and up 5% at constant exchange rates (CER).
Retail comparable sales rose 5%, well below the +37% of a year ago. But it was a tough comparison given that the previous H1 was the bounce-back period post-Covid and this time the economic backdrop is very volatile.
The good news within that is that the comp sales figure for Q1 may only have been +1% but in Q2 it was +11%, a strong result and even more so given that Q2 was a period in which trading conditions declined for so many brands.
Asia Pacific’s overall comp sales fell 4% but were up 11% in Q2 (boosted by South Korea and Japan), while in the Americas they fell 3% and were down in both quarters. But they remain much higher than pre-pandemic and many Americans shopped for the brand in Europe during Q2.
In EMEIA, comps rose an impressive 34% with a 47% jump in Q1 and a still-healthy 25% rise in Q2. Tourist growth helped with France and Spain were particularly strong.
Wholesale revenue increased 6% reported and 1% CER with a good performance in the Americas and EMEIA broadly offset by the halting of shipments to Russia and weakness in Asia travel retail following lockdowns. Licensing revenue grew 6% reported and 8% CER.
Adjusted operating profit rose 21% to £238 million (+6% CER) and the adjusted operating profit margin rose to 17.7% from 16.2%. Reported operating profit was up 27% to £263 million.
It’s maintaining its near-term guidance to FY24 “while mindful of the challenging macro environment and its potential impact on trading, particularly Covid-19-related disruption in Mainland China and recessionary risks in Europe and the Americas”.
And it has a new medium-term target to grow sales to £4bn at CER.
During the half, the company invested heavily in the brand with a “highly successful campaign” to support the expansion of its Lola handbag range, which drove “above average comparable store sales growth in leather goods”.
New product launches and seasonal collections performed strongly. As mentioned, leather goods sales saw “good momentum” with comp sales up 11% in H1 and 15% in Q2.
This was driven by handbags with the Lola now its best seller and helped by the introduction of the Frances shape for AW22.
Outerwear comp sales grew 3% in H1 but growth was dented by Chinese lockdowns. Elsewhere though, it saw 18% growth, with a strong performance across both Men's and Women’s.
It also opened or renovated 22 stores and is on track to open or refurbish 65 stores in the new concept this year, in addition to the 47 stores from FY22.
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