Burberry Trails Peers in China as It Waits for New Designs

(Bloomberg) -- Burberry Group Plc is still waiting for new leadership to revive the brand, as it trails rival luxury-goods makers in the all-important Chinese market.

The shares fell as much as 5 percent early Wednesday in London as investors were disappointed by the British fashion brand’s latest quarterly sales in Asia, which MainFirst analyst John Guy called “actually pretty poor” in light of surging demand for luxury products in China.

Chief Executive Officer Marco Gobbetti, who built his reputation as a turnaround artist at luxury leader LVMH by revamping its Celine and Givenchy brands, tapped the latter label’s former designer, Riccardo Tisci, to refresh Burberry’s product offer and image. Tisci, who was known at Givenchy for selling luxury athleticwear alongside elaborate couture gowns, is slated to show his first collection for Burberry during September’s London Fashion Week.

Tisci succeeded Christopher Bailey, who’s preparing to leave the company after 17 years in which he modernized the trench-coat maker’s look but struggled to reconcile the brand’s high-end ambitions with its dependence on discount-prone department stores in the U.S. While Bailey pinned Burberry’s ambitions for ready-to-wear fashions on big “see now, buy now” fashion shows with all products available for immediate purchase, Tisci wants to supplement shows with more frequent capsule collections that emulate the approach of streetwear brands.

“It’s a new way of communicating,” Chief Financial Officer Julie Brown said on a call with reporters. “We can expect to have more periodic product drops that would be more exciting, and sometimes unexpected by consumers.”

Comparable sales in Asia rose at a mid-single-digit rate in the quarter ended June 30, Burberry said. Overall, the measure rose 3 percent, matching the average estimate of 20 analysts surveyed by the company.

Europe, Americas

Weaker sales to tourists dragged down Burberry’s performance in the U.K. and continental Europe during the quarter, while retail performance in the Americas grew by high single digits as the brand drew customers into its own stores by reducing its presence at other retailers.

Burberry’s revenue rose just 2 percent last year, compared with 13 percent growth at LVMH’s fashion division and a more than 25 percent jump for Gucci owner Kering SA.

During the quarter, Burberry announced the acquisition of a handbag factory in Italy as part of Gobbetti’s plans to expand its accessories business. Gobbetti is counting on growth in leather goods, which currently make up 40 percent of sales, to make up for the midpriced polo shirts and logo tees Burberry had previously sold -- often at steep discounts -- in department stores across America. Many of those outlets have been cut as part of a plan to move the Burberry brand upmarket in line with the $2,000 price tag on its iconic trench coats.

Tisci styled his first ad campaign for the brand this spring, announced a collaboration with the British designer Vivienne Westwood, and dressed Beyonce in a Burberry-checked bustier and leggings for a music video shot in Paris’s Louvre.

©2018 Bloomberg L.P.