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Burberry Idea Proposal (LON:BRBY)

Burberry Idea Proposal (LON:BRBY)
 

Will Burberry’s upmarket move to the luxury category lead to a successful turnaround story for the company?

 

Report Available: September 27, 2018

 

Blueshift’s initial research found BRBY on the verge of introducing the first collection from its new creative director as it looks to move more firmly into the luxury category. The brand has lagged its peers in recent years and this move is aimed at turning around the company’s fortunes with a revitalized look, updated logo, and new marketing and distribution strategy.

 

Observations

  1. BRBY has struggled in recent years, with company sales growth lagging its peers. Its full-year results beat forecasts with a 2% increase in profit, and comp store sales grew 3%, in line with expectations. Group revenue was down 1%. In its Q1 trading update released in July, BRBY said its retail revenue climbed 3% with comp store sales up 3% as well. Revenue in Asia Pacific was up mid-single digits, declined low single-digits in EMEIA, and grew high single-digits in the Americas
  2. BRBY hired Riccardo Tisci in March as it new creative officer. The former creative director at Givenchy who is credited with resurrecting the LVMH brand, Tisci is taking over all BRBY collections and tasked with revitalizing the brand while taking it firmly into the luxury category. Tisci joins BRBY to team up again with new CEO Marco Gobbetti. The two worked together at Givenchy in the 2000s when Gobbetti was CEO and hired the relatively unknown Tisci.
  3. Gobbetti was brought on board to elevate the brand to the more rewarding luxury segment, enhancing its leather goods offering, freshening up the collection (including a contemporary high-end streetwear offering), scaling back on lower-end wholesale partnerships, and refreshing stores. He’s once again tabbed Tisci to lead the charge.
  4. BRBY is set to adopt the trendy drop model whereby collections are available in limited quantities at various locations without much advance notice. This heightens demand with items in short supply, with the outcome almost always a quick sell-out as customers look to “get it while it’s hot.” BRBY’s first drop will be after Tisci’s runway debut Sept. 17 during London Fashion Week and the brand will refresh its products more frequently instead of putting the whole collection for sale immediately. Calls to several BRBY stores in the U.S. confirm that items from the new collection will be available in stores after Sept. 17 and will be rolled out sporadically. None of the associates Blueshift spoke with had details about which products will be for sale initially and which will be available in subsequent waves.
  5. As part of its new look under Tisci, BRBY unveiled a new logo and monogram last month, plastering buildings in London, New York, South Korea, and China with the new look. As part of Tisci’s first collection, BRBY announced it would no longer use fur and will also stop its practice of burning unsold products after it was revealed the company destroyed nearly $40 million of merchandise to protect the brand and keep it from being sold cheaply. These were items deemed unfit for sale, typically those that did not sell at discount outlets and were more than five years old. Instead BRBY will now re-use, repair, recycle or donate these items.

 

What are first impressions of the new BRBY items to hit store shelves? What are customers buying? How is demand for these items? How is supply? What does this show about BRBY’s turnaround efforts? How does this shift thinking about BRBY’s position in the market? What does it say about BRBY relative to its peers? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: BRBY store personnel and Store personnel at retailers carrying BRBY.

 

Companies: Burberry Group plc (BRBY), Hermes International SA (HESAF), Kering SA (PPRUF), LVMH-Moet Hennessy Louis Vuitton (LVMHF), Prada Spa (PRDSF), Compagnie Financiere Richemont AG (CFRHF)

 

Research Begins: September 17, 2018

 

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