LONDON, United Kingdom — Burberry chief Marco Gobbetti’s turnaround plan for the British megabrand is starting to take shape with a focus on building a strategic leather goods pillar, delivering faster and more regular product drops and supporting creative director Riccardo Tisci’s early emphasis on the contemporary framing of heritage products.
“We’re still in early stages of transformation with the majority of changes still ahead of us, but so far I’m pleased with the progress,” Gobbetti said at a press conference Wednesday at Burberry’s Horseferry House headquarters after the brand announced preliminary results for the year ending March 31, 2018. Operating profit climbed 5 percent to £467 million ($629 million), while annual revenues fell 1 percent. “We are all very excited about this new year and I’m personally really enjoying working together with Riccardo," he said.
Gobbetti is six months into his 5-year plan to reposition Burberry as a true luxury player and re-energise a brand whose sales growth has significantly lagged rivals LVMH and Kering. Core to the strategy is a new focus on leather goods, which currently accounts for less than 40 percent of revenue, trailing competitors such as Gucci, which generates 55 percent of sales from the category. Burberry recently acquired Florentine leather goods specialist CF&P as well as its in-house team of 100 craftsmen. The goal is to create a new leather-focused “centre of excellence” and Gobbetti signalled that more suppliers acquisitions are likely coming. The brand already does some of its production in-house, including the manufacturing of its classic trench coats.
“In my experience, you have to own it if you want to scale. This is a significant milestone for us and will create a strong foundation for our leather goods strategy,” explained Gobbetti. Burberry’s new £1390 ($2000) belt bag, launched in March, has been selling well, he added. A new smaller version of the bag is starting to hit stores imminently. “The early days are quite encouraging," he continued. "It’s a classic, it can become a pillar for us."
Still, one well-performing bag doesn’t equal success.
“Their ambitions in handbags are huge," said Luca Solca, head of luxury goods at BNP Exane Paribas. "but to challenge megabrands in this space like Gucci and Vuitton, and to creep up with pricing in this space, is major. Buying a leather goods company in Florence is all very good but one good style (the belt bag) doesn’t mean you’re finished."
Accessories sales climbed one percent in the fiscal year, while menswear sales rose four percent and womenswear climbed two percent. “They’re off to a good start, the team is coming together, they’ve built up management and they’re being prudent with guidance," added Solca.
Gobbetti sees a major opportunity in the $1,000 to $2,000 price point for handbags, rather than competing with top-tier luxury players such as Dior, Chanel and Hermès, which sell styles priced upwards of $2,000. Sabrina Bonesi, the former Dior accessories designer who is now Burberry's director of leather goods and shoes, is already working with Tisci on new ranges with different silhouettes and broader price points, he added.
Of course, Tisci’s designs will be critical to the success of Burberry’s turnaround. Consumers caught a glimpse of a youthful, more elegant look when the former Givenchy designer styled a collection of images featuring pieces from Burberry's pre-spring 2018 range which appeared on his Instagram. Dubbed the “B Classic” series, they showed young couples — some with shaved heads; all with hidden faces — modelling what Tisci called the “icons of the House” such as Burberry’s car coats, quilted jackets, kilts, ponchos and trench coats.
While Tisci's first runway show for Burberry is slated for September, the collection won't hit stores until February, said Gobbetti, though he wouldn't be drawn on the specifics of whether the brand would continue its "see-now, buy-now" strategy.
What he did say was that speed — delivering more frequent and fresher products to “to keep the attention of the customer” — was also key to the strategy, hinting we may actually see more from Tisci before September.
Christopher Bailey's last collection for Burberry was released in batches rather than at once. The "Rainbow Legacy" collection celebrating the LGBTQ+ community was available immediate consumption, while other items arrived in stores in phases, such as the reissued 1980s and 1990s pieces from the Burberry archive called the "February Capsule," which were also seen on the runway. The strategy has attracted new, younger customers who bought full looks, rather than one-off items, Gobbetti said. A second capsule collection with skater-inflected Russian designer Gosha Rubchinskiy is planned for July.
Another pillar of Burberry’s strategy is shifting its distribution to a more retail-led approach to better control its brand image. It has closed smaller stores in non-strategic locations, such as US shopping malls, and is opening in high-visibility, influential fashion markets (see its new Dubai opening next month). Overall Burberry closed 34 stores, including seven outlets, last year. Burberry has also brought its full inventory to e-commerce platform Farfetch to broaden distribution.
“The billion-dollar question is — can the new product and pricing strategy translate into revenues?” asked John Guy, head of European luxury at Mainfirst Bank says. For now, it’s too early to tell.