The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
The company said Thursday it will reduce markdowns, a measure that may hurt second-half sales though should improve long-term profitability. The stock rose as much as 5.8 percent after first-half sales declined less than expected and Burberry said revenue returned to growth in October.
Burberry aims to upgrade its leather-goods pricing to the levels enjoyed by rivals Prada and Gucci, according to Luca Solca, an analyst at Sanford C. Bernstein. Like Prada, Burberry has also been trying to get a stronger grip on its product pricing by reducing sales to third-party retailers to reduce inventory in the market. The pandemic is putting the luxury-goods industry through one of its biggest crises yet, leading to an 88 percent decline in Burberry’s first-half earnings per share.
Wholesale revenue, which represents about a fifth of total sales, dropped 38 percent in the first half.
Chief executive Marco Gobbetti put the company on a transformation plan before the pandemic struck, seeking to elevate the quality of its products and woo millennials and younger shoppers. But Covid-19 heightened the need to shift gears, with the brand announcing in July it would consolidate its offerings around ready-to-wear, accessories and shoes as it cuts 500 jobs.
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Burberry shares have lost about a quarter of their value this year, the worst performers among major European luxury-goods stocks.
While the recovery in China, South Korea and the US was evident with “strong” double-digit growth rates in the quarter ending September, Europe and Japan notably “remain impacted by the significant reduction in tourism.”
Burberry has been active in attracting tech-savvy Chinese customers. It recently opened a store in Shenzhen with Chinese web giant Tencent Holdings Ltd. that blends a physical and digital experience.
There have been renewed lockdowns in Europe’s fashion capitals. Burberry said it remains “conscious of the uncertain macro-economic environment” caused by the virus and currently more than 10 percent of its stores that are closed globally following recent lockdowns, it said.
By Angelina Rascouet.
The luxury goods maker is seeking pricing harmonisation across the globe, and adjusts prices in different markets to ensure that the company is”fair to all [its] clients everywhere,” CEO Leena Nair said.
Hermes saw Chinese buyers snap up its luxury products as the Kelly bag maker showed its resilience amid a broader slowdown in demand for the sector.
The group’s flagship Prada brand grew more slowly but remained resilient in the face of a sector-wide slowdown, with retail sales up 7 percent.
The guidance was issued as the French group released first-quarter sales that confirmed forecasts for a slowdown. Weak demand in China and poor performance at flagship Gucci are weighing on the group.