Nov 16, 2022
Burberry looks to reignite spark under new leadership duo
Nov 16, 2022
Burberry's new chief executive Jonathan Akeroyd will on Thursday set out his plan to finish the job started by his predecessor: boosting growth at the British luxury brand to the levels of its European rivals.
Akeroyd, who took over in April, will present his strategy alongside first-half results that will show the lingering impact of lockdown restrictions in China, Burberry's biggest market. He has already made his key appointment in choosing Daniel Lee to replace Riccardo Tisci as chief designer at the 166-year-old label.
Burberry has lagged competitors like Gucci, Prada and Loewe in creating a sharp brand in recent years and Lee will play an "important part in re-igniting interest", said Mario Ortelli, managing partner at advisory firm Ortelli&Co.
Lee, who was previously at Kering's Bottega Veneta, should focus on strengthening its runway, streetwear, and menswear collections to appeal to younger consumers, said Ortelli. That group is expected to buoy growth in the sector in the coming years with purchases being made from the age of 15, according to industry forecasts from consultancy Bain just released.
Burberry should also expand its leather goods and footwear business, Ortelli said. Leather goods account for around 20% of Burberry's sales versus 70% at Bottega Veneta.
The company's former chief executive Marco Gobbetti set out a plan in 2018 to reposition the brand firmly in the luxury segment. He raised prices, limited distribution to its own shops and high-end department stores and cut discounting. Tisci, in turn, changed Burberry's design language by introducing a TB monogram, that increased the brand's appeal to younger luxury consumers.
The final stages of Burberry's five-year plan were expected to see an acceleration in revenue growth and an increase in profits. But the pandemic thwarted that aim, with lockdowns closing stores and travel restrictions preventing tourists from Asia and elsewhere spending in Paris and London.
CREATING A BUZZ
The label eked out a 1% rise in comparable store sales in its quarter ended July 2. Burberry's rivals -- led by French luxury leaders LVMH and Kering -- by contrast, have most recently reported double-digit sales growth in the quarter to the end of September.
LVMH's fashion and leather goods division, home to Louis Vuitton and Dior, reported a 22% rise in sales on a comparable basis, while Kering's sales rose 14%, although revenue at its star label Gucci rose 9%, missing market forecasts of 11%.
Akeroyd and Lee will seek to emulate the feat of Gucci's CEO Marco Bizzarri and creative director Alessandro Michele who set a template for creating buzz at well-established luxury brands, increasing profit nearly four-fold between 2015 and 2019.
Lee's appointment could signal a re-evaluation of Burberry's British heritage, according to Lydia Slater, editor in chief at Harper's Bazaar.
"Lee's interpretation of that heritage is likely to be the opposite of conventional, given the iconoclastic way he transformed Bottega Veneta from a discreet luxury brand into a cult, directional label," she said.
The Bradford-born designer became famous for re-invigorating the Italian brand by blowing up its famous "intrecciato" weave in bags and shoes and creating one of the most popular colours of 2021, dubbed "Bottega Green".
Akeroyd has a track record of turning around established brands such as Alexander McQueen and Versace, analysts say.
"Over the longer term, brand reinvigoration should help keep fashion fans loyal and Burberry’s products increasingly coveted," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
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