Burberry has posted a 3% increase in like-for-like store sales and a 2% increase in operating profit for the year ending 31 March 2018 as its move to reposition itself further upmarket continues.
The British luxury house achieved adjusted operating profits of £467m, which was slightly ahead of city analysts’ expectations. Like for like store sales were up 3% while revenue was largely flat at £2.73bn.
CEO Marco Gobbetti said the business was “pleased” with the performance and described the past year as one of “transition” as the business appointed a new chief creative officer, Riccardo Tisci, achieved cost savings of £64m and acquired Italian leather goods manufacturer CF&P.
“While the task of transforming Burberry is still before us, the first steps we implemented to re-energise our brand are showing promising early signs. With Riccardo Tisci now on board and a strong leadership team in place, we are excited about the year ahead and remain fully focused on our strategy to deliver long-term sustainable value,” Gobbetti said.
While the profit growth was better than expected Euromonitor International fashion and beauty research analyst Pia Ostermann pointed out that its revenue growth was flat compared to other global luxury brands. However Ostermann likened the situation to Burberry to that of Italian house Gucci before its highly successful creative director Alessandro Michele was appointed, and said Burberry too had the potential to position itself as a brand of choice, particularly in the all-important bag category, among millennials.
“Several factors have to be taken into consideration as Burberry is in the midst of re-energising the brand, with changes in management and a new strategic direction. Gucci experienced a similar transformation in 2015, with Alessandro Michele, who had been promoted to creative director. Since then there has been a focus on millennials, which has driven the rapid growth of the brand,” Ostermann said.
“Millennials are becoming a key demographic for luxury brands, and Burberry has a competitive advantage as it is considered a digital pioneer, for instance with enabling consumers to shop instantly from the catwalk. Burberry is known for its trench coat, ready-to-wear and their check print, however it is not been traditionally considered a bag brand by consumers. With a sharper focus on leather goods, it gives the opportunity to appeal to the younger consumer. The early signs of broader millennial appeal is evidenced by influencers who are increasingly posting images of the brand on social media and the Burberry iconic check print has been particularly pervasive,” she said.
Tisci has recently been offering a glimpse of his new creative vision for Burberry in Instagram posts, giving a preview of an edit of items that pay tribute to Burberry’s key pieces and which will form part of the pre-Spring 18 collection. The house check is at the centre of the collection.
His arrival at Burberry was just one of a number of key changes in creative heads at global luxury houses with Celine, Louis Vuitton Men and Dior Homme among those who have also recently appointed new chief designers.
“In the past few months, there have been key changes in creative leadership at leading luxury houses, with creative directors known for their street wear aesthetic appointed to top roles – including Virgil Abloh at Louis Vuitton and Kim Jones at Dior. With the positive outlook for luxury goods globally (expected to reach 5% CAGR until 2022), and the new strategy implemented, Burberry has promising growth prospects in its position as a digital pioneer and iconic British luxury heritage brand,” Ostermann added.