Jul 11, 2018
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Burberry upbeat on Farfetch success, new plan for multiple drops

Jul 11, 2018

Burberry was upbeat on Wednesday as it issued its Q1 trading update and also detailed plans for more frequent product drops and what seems like a partial step back from see-now-buy-now. The luxury company also said it was making “continued progress” on executing its big new strategy plan and that its comparable sales rose 3% in the latest quarter, even though reported sales were flat.


While the big news around such trading updates is usually the sales figure, in this case, it was the announcement of a move to a new way of engaging consumers “with frequent and sometimes unexpected drops of fresh product” that generated the most buzz.

But does this mean the company is really retreating from the see-now-buy-now runway model of which it was the highest-profile pioneer not so many years ago? No… and yes. On a conference call after the update was released, CFO Julie Brown said that the company will follow a “new model” that sees those publicity-friendly more frequent drops running alongside a core collection previewed some months in advance.

She said the collection Riccardo Tisci will show on the runway in September will include some instant-drop product but much of it will only reach stores in February.

That’s perhaps understandable because while see-now-buy-now generates huge interest, in its purest form, it still has one problem that ‘traditional’ collections carry - the excitement not lasting.

So “Riccardo is now working on a limited edition capsule as part of his debut collection for Burberry and this will be available in a series of instant drops in September,” Brown said. “There’s a move towards a fluid and creatively-led delivery cycle, a new way of conversing with our customers. We will have more periodic product drops that will be more exciting.”

This is one area in which luxury could be said to be following a successful model pioneered by mass-market retail, with the instant-excitement-plus-core-collection equation hopefully equalling higher sales.

On Wednesday Burberry also confirmed that as well as those instant pieces from the inaugural Tisci collection, the much-talked-about Vivienne Westwood collaboration of “re-imagined iconic styles [will] launch in select stores in December.”

And it looks like we need to get used to many more such initiatives in future.

Back in May when he delivered Burberry’s results, CEO Marco Gobbetti had said that delivering the full collection in one go doesn't offer much of a reason to return to the store and it's important to keep customers’ attention with plenty of new product.

Meanwhile on Wednesday, Gobbetti said he was “pleased with our progress” and that “the team has embraced Riccardo’s creative vision and is working well together as we prepare for his debut collection in September, the next step in our journey.”

He struck a distinctly optimistic note saying that while he knows “it will take time to achieve our ambitions, our progress to-date and the energy in and around the company give me confidence for the future.”


So what exactly went on in the last quarter, the 13 weeks to June 30? Well, in addition to comps rising 3%, retail revenue also rose 3% at constant exchange rates, although on a reported basis it was almost flat, edging up to £479 million from £478 million a year ago. And while that 3% figure was hailed as a good one, it lagged the 4% growth of the equivalent period last year.

Asia Pacific grew by a mid-single digit percentage as mainland China grew and Hong Kong, Korea and Japan “all benefited from Chinese spend shifting more to Asian tourist destinations within the region.”

EMEIA declined by a low-single-digit percentage as “softer tourist demand impacted both the UK and Continental Europe and the Middle East remained weak due to macro factors.

The Americas grew by a high-single-digit percentage. Improved trends that had been seen in the fourth quarter of FY 2018 continued, with footfall in the US being positive.


And it saw “strong” growth in digital. Direct-to-consumer growth was led by Asia Pacific and mobile is now the largest digital channel.

The company said that it saw a “solid performance in retail in a period of transition,” and it seems to have been helped by new initiatives from the firm.

It expanded its Dubai flagship, closed two stores as part of its strategy of focusing on the most luxury locations, opened pop-ups to showcase new handbags in Beijing, Dubai, New York and Seoul, and  completed the global rollout of a new “digital clienteling tool supporting enhanced customer service.”

Another important debut was its Farfetch collaboration, which Gobbetti said is “performing ahead of our expectations.”

Encouragingly, the company also said that its Q1 growth was “led by local and returning top customers,” and that newly-launched handbags, such as the Belt and D-ring “performed well, a positive early sign for the transformation of our leather offer.”

And given that Burberry is still more of an outerwear specialist than a leather goods name, it's also encouraging that the company said rainwear grew in Q1 “with strength from Car Coats and seasonal tropical gabardine.” Its refreshed heritage trench rollout is now live in over 80 stores and it said that “customers are responding to our more complete wardrobe offer and full look merchandising.”

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