If you already charge £1,295 for a cotton trench coat and £995 for a cable knit cardigan, it must be hard convincing investors that you need to move further upmarket. But this is exactly what Marco Gobbetti – the new chief executive at luxury fashion house Burberry (BRBY) – wants to achieve. In his view, today’s luxury consumer “demands innovation, curation and excitement”, as well as “creativity at every turn”. To win over this sort of customer, he says Burberry must “sharpen” its brand positioning. But what does this mean?
First, leather goods and accessories will be more trend-led in an effort to attract new customers, and although ranges will be simplified the aim is to convince customers to buy complete looks, as opposed to just one or two items per collection. Stores will be refurbished and streamlined to deliver a more personal service, while wholesale might also be overhauled – all of which should help cement the 'omnichannel' business model.
In the meantime, Burberry is getting some things right. True, a fortuitous foreign exchange tailwind may have an expiry date, but sales, margins and profits are all growing. Adjusted operating margins expanded by 210 basis points from 12.5 per cent to 14.6 per cent thanks, in part, to a significant improvement in profits from the beauty division – a good showing following the licence of global rights to cosmetics giant Coty for £130m earlier this year.
But Christopher Bailey – who has served as the group’s chief designer since 2004 – wants to leave the business in 2018. As to who might succeed him, current names in the mix include Phoebe Philo – the woman credited with reviving the fortunes of Parisian brand Celine. Incidentally, Mr Gobbetti used to serve as that brand’s chief executive.
Analysts at Morgan Stanley expect cash profits of £623m for the year ending March 2018, giving EPS of 79.9p, compared with £608m and 76.8p in FY2017.
| BURBERRY (BRBY) | ||||
| ORD PRICE: | 1,803p | MARKET VALUE: | £7.7bn | |
| TOUCH: | 1,802-1,803p | 12-MONTH HIGH: | 2,024p | LOW: 1,367p |
| DIVIDEND YIELD: | 2.2% | PE RATIO: | 26 | |
| NET ASSET VALUE: | 335p* | NET CASH: | £654m | |
| Half-year to 30 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 1.16 | 102 | 16.3 | 10.50 |
| 2017 | 1.26 | 128 | 21.5 | 11.00 |
| % change | +9 | +26 | +32 | +5 |
| Ex-div: | 21 Dec | |||
| Payment: | 2 Feb | |||
| *Includes intangible assets of £348m, or 81p a share | ||||
