top of page

Burberry’s Transformative Journey to Super Luxury


Burberry’s Transformative Journey to Super Luxury | The Business Anecdote

Burberry, founded in 1856, has long been synonymous with British elegance and timeless style. However, in the early 2000s, the brand faced challenges, its iconic check pattern had become ubiquitous, and it needed a fresh approach to stay relevant. Under the previous leadership of Marco Gobbetti, Burberry embarked on a strategic reinvention, aiming to elevate itself to the highest echelons of luxury. The brand shifted its focus from mass luxury to super luxury, aiming to compete with the likes of Gucci and Dior. Let's delve into the key strategies and pivotal moments that reshaped Burberry's identity:


1. The Vision for Super Luxury

Marco Gobbetti, Burberry's new CEO, unveiled an ambitious vision: to elevate the brand into the realm of super luxury. This meant repositioning Burberry as a premium British label with higher prices and profit margins. Investors, however, were initially skeptical, causing a 10% drop in the company's shares [1].

2. The Departure of Christopher Bailey

Christopher Bailey, the creative genius behind Burberry's digital transformation, unexpectedly stepped down after 17 years with the brand. Gobbetti emphasized that he played no part in Bailey's departure but acknowledged the need for a new creative leader. Bailey's legacy included live-streamed fashion shows and redesigned flagship stores, which catapulted Burberry onto the global stage [1].

3. Sharpening the Brand Position

Gobbetti's strategy involved sharpening Burberry's brand position. He recognized that luxury consumers sought both fashion-forward designs and newness. While some products, like the iconic trenchcoats, were already at the right level, others needed adjustment. For instance, simple polo shirts required a 50% price increase to match other luxury players [1].

4. Temples of Luxury

Burberry embarked on an extensive store transformation. The goal was to turn its retail spaces into "temples of luxury." Millions of pounds were invested in revamping stores worldwide, emphasizing opulence and exclusivity. The brand also decided to stop selling its trench coats and handbags through some department stores, even if it meant short-term sales decline [1].

5. The Trench Revival

Burberry's core heritage lay in its trench coats. The controversial move was to emphasize this heritage once again. By reverting to its core values of British manufacturing and heritage, Burberry aimed to resonate with consumers across the globe. The trench became a symbol of timeless elegance and craftsmanship [2].

6. Technology Meets Tradition

Burberry blended tradition with cutting-edge technology. In its brick-and-mortar stores, the brand combined British fashion designs with innovative displays. The goal was to enhance the customer experience, both online and offline. By embracing technology, Burberry bridged the gap between heritage and modernity [3].

7. Crafting Desire

Burberry mastered the art of desire. Whether through Instagram posts showcasing the craftsmanship of cashmere scarves or virtual experiences powered by partnerships with Google, the brand made luxury irresistible. It understood that today's consumers crave not just products but also the stories behind them [4].


Appointment of Jonathan Akeroyd as CEO

In June 2021 Marco Gobbetti stepped down as CEO of Burberry and took up a role as CEO of Salvatore Ferragamo. Jonathan Akeroyd was then appointed as the CEO of Burberry, effective from April 1, 2022. A British national, Jonathan had previously served as the CEO of Milan-based Gianni Versace SpA since June 2016. During his tenure at Versace, he successfully reorganized and accelerated growth at the iconic Italian fashion house, leveraging its rich creative heritage to enhance product offerings, communications, and the overall customer experience [10].


Before his role at Versace, Jonathan held the position of CEO at Alexander McQueen from 2004 to 2016. During this time, he led a remarkable turnaround for the British luxury brand and laid the foundation for its global expansion. His extensive experience also includes senior fashion roles at London-based luxury department store Harrods.


As Burberry's new CEO, Jonathan Akeroyd has outlined several strategic goals for the brand. Notably, he plans to refocus on Britishness by strengthening Burberry's connection with British design, craft, and culture. Additionally, he aimed to double sales in leather goods, shoes, and women's ready-to-wear, while also achieving around a 50% growth in outerwear sales in the medium term [11].


His vision for Burberry includes building on the brand's unique British creative heritage and accelerating growth. Jonathan's deep expertise in the luxury and fashion industry will be instrumental in advancing the next phase of Burberry's evolution. With ambitious plans and a strong platform, he aims to lead the iconic British luxury brand to new heights.


Burberry's 23/24 Profit Margins

Burberry recently issued an early profit warning for the year ending March 30, 2024. The company now expects its adjusted operating profit to be in the range of £410 million to £460 million (approximately $524 million to $588 million). These estimates fall below the company's previous guidance of £552 million to £668 million issued during its November earnings [5].


The decline in profit forecasts is attributed to several factors, including currency headwinds. Based on foreign exchange rates effective as of December 29, 2023, Burberry expects a currency headwind of approximately £120 million to revenue and £60 million to adjusted operating profit [6].

Despite these challenges, it's worth noting that in the previous financial year (2022-2023), Burberry achieved an adjusted Group Return on Invested Capital (ROIC) of 28.6%, significantly ahead of the Group's Weighted Average Cost of Capital (WACC). This improvement was mainly due to the increase in adjusted operating profit, with average operating assets rising by 5% [7] [8] [9].


Burberry's Share Price

Burberry has experienced a significant decline in its share price. Since the beginning of the year, its value has dropped by nearly 20%.

The recent 2.5% drop in Burberry's shares was triggered by a profit warning from its Paris-listed rival, Kering, which owns brands like Gucci. Demand for luxury goods has slowed down, particularly in China, impacting Burberry's performance.


Takeover Target Status

City analysts have raised concerns that Burberry is now a potential takeover target due to its current valuation [12]. Unlike many luxury brands that operate as part of larger groups, Burberry stands out by operating as a single brand. Its rich heritage and iconic product lines make it an attractive proposition for potential acquirers [12]. A survey conducted by Bloomberg last year listed Burberry among the top companies floated as potential takeover targets, alongside Germany's Hugo Boss and Swiss luxury group Richemont. While the situation remains dynamic, it's clear that Burberry's recent share price slump has put it on the radar as a potential acquisition target.


Conclusion

Burberry's reinvention journey was bold and transformative. From redefining luxury to celebrating its heritage, the brand successfully navigated the changing market landscape. As it continues to evolve, Burberry remains an exemplar of how a legacy brand can adapt, innovate, and thrive in the ever-evolving world of fashion.


That said, the story about their transformative journey hasn't concluded yet. One could say they are still in a phase of consolidating that transformation. It is yet to be seen if Burberry might be acquired, or if they can reverse the downward trend of their share price. One thing is certain, their brand legacy has shown they are not a company incapable of getting themselves out of difficult situations or adapting with the times.


Source

(3) Burberry turns to technology to reinvent itself - BusinessToday - Issue .... https://www.businesstoday.in/magazine/cover-story/story/innovation-burberry-25173-2011-11-22.

(4) A Look at How a Luxury Brand Reinvented Itself and Took the ... - Medium. https://medium.com/product-launches-and-branding/burberry-the-rise-of-a-digital-icon-7b9527008726.

(5) Burberry issues early profit warning | Fashion Dive. https://www.fashiondive.com/news/burberry-early-profit-warning-2024/704483/.

(7) Financial Performance and KPIs - Burberryplc - Burberry Plc Corporate. https://www.burberryplc.com/investors/financial-performance-kpis.

(8) Results, Reports and Presentations - Burberryplc - Burberry Plc Corporate. https://www.burberryplc.com/investors/results-reports-presentations.

(11) Burberry new CEO sets out 'Britishness' strategy and £5bn sales target. https://www.retailgazette.co.uk/blog/2022/11/burberry-ceo-strategy/.

(12) Burberry 'a takeover target' after share price plunge - The Telegraph. https://www.telegraph.co.uk/business/2024/04/24/burberry-takeover-target-after-share-price-plunge/.

(13) FTSE 100 slips as Croda, Burberry weigh. https://uk.news.yahoo.com/ftse-100-extends-record-run-073454466.html.

16 views

Comments


bottom of page