CHICAGO, ILLINOIS – NOVEMBER 14: A sign hangs above the entrance of a Burberry store on Michigan Avenue along the Magnificent Mile on November 14, 2024 in Chicago, Illinois.
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LONDON — Burberry is aiming to win back shoppers and boost waning sales by refocusing on heritage designs and statement pieces under sweeping revamp plans designed to revive the luxury fashion house’s ailing fortunes.
The “Burberry Forward” strategic overhaul, announced Thursday, intends to reconnect the brand with its “original purpose” while taking a more disciplined approach to product selection, with a focus on its staple coats and scarves, the company said.
Shares jumped over 22% on the announcement, to log it biggest-ever intraday gain. The stock ended the day up 18.7%. Shares are down around 39% year-to-date.
Analysts responded positively to the news, pointing to a potential “turning point” for the embattled brand.
Schulman unveils new vision
The plans provide the first insight into Burberry’s repositioning under new CEO Joshua Schulman, who joined in July from Michael Kors, becoming the brand’s fourth CEO in the last decade.
“Today, we are acting with urgency to course correct, stabilise the business and position Burberry for a return to sustainable, profitable growth,” Schulman said in a statement.
Burberry
Schulman said that the brand had drifted too far from its core products over recent years, distancing consumers and focusing too much on niche products over heritage items. He also noted that the brand’s “elevation strategy” had caused pricing, particularly in leather goods, to fall out of sync with its market position.
“Now, we have a clear framework to reignite brand desire, improve our performance and drive long-term value creation. Building on our strong foundations, I am confident that Burberry’s best days are ahead” he added.
The plans were delivered alongside Burberry’s 2024 interim results, which saw sales fall 20% for the second consecutive quarter.
A ‘turning point’ for embattled Burberry
The underperformance comes amid a wider slowdown in the luxury sector, with the personal luxury goods market set to contract 2% this year. However, analysts have long pointed to inherent failings at the company, with successive CEOs attempting unsuccessfully to revive the brand and elevate its image.
Piral Dadhania, analyst at RBC Capital Markets, said that Thursday’s overhaul plan was a long time coming and should allow the brand to hone in on its strongest areas.
“Focus on heritage and outerwear is what we have been waiting for in terms of strategy as it offers more authenticity in a less competitive category in our view,” Dadhania said in a note.
Mamta Valechha, consumer discretionary analyst at Quilter Cheviot, described it as a “turning point in what has been a very difficult period.”
Pedestrians walk past the window display of the store of British fashion label Burberry, in central London, on September 2, 2024.
Henry Nicholls | Afp | Getty Images
Citi’s head of luxury goods equity research, Thomas Chauvet, said he expects to see “significant changes” in the areas of product design, assortment, pricing architecture, distribution and communication — all while not moving away from the global luxury brand positioning.
The strategy shift follows speculation that Schulman would adopt a ‘British Coach’ strategy, using methods from his former employer to target more aspirational consumers. Such methods might have included doubling down on outlets and increasing exposure to off-price retailers.
Yanmei Tang, analyst at Third Bridge, welcomed the shift toward higher-end luxury Thursday, but said that the success of the overall strategy would depend heavily on Schulman’s ability to align his vision with that of the company’s designers.
“Burberry could take inspiration from brands like Louis Vuitton by balancing high-end, artistic collections with accessible, core items, keeping its British heritage at the forefront. The success of this strategy will depend on alignment between Schulman’s business acumen and Lee’s creative vision,” she said.
Bernstein upgraded its rating to outperform late last month, saying at the time that the company seemed “set on the right course” following the appointment of Schulman. HSBC followed suit shortly afterwards.
