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Burberry’s shares were trading -9.42% lower in the London Stock Exchange on November 9 as the Company’s CEO, Marco Gobbetti’s, fails to convince investors of its new brand positioning.
In a letter sent to investors early morning on November 9, Marco Gobbetti, Burberry’s new CEO, announced he plans to firmly establish the brand’s position in the luxury segment and deliver sustainable long-term value.
The British brand has also announced double-digit underlying profit growth in the first half of 2017, ending September 30. Underlying revenue was up +4% in the period and adjusted operating margin increased to 14.6%.
Achieving the new set goals in the luxury segment “will require us to change our approach to product, communication and customer experience, said Gobetti, adding the brand will create “compelling luxury leather goods and accessories to attract new customers”. Burberry is to rationalise its non-luxury wholesale and retail doors, with an initial emphasis on the U.S. and then EMEA, so as to ensure that its distribution is consistent with the brand positioning.
“Now is the right time for Burberry to implement the next phase of its transformation. By re-energising our product and customer experience to establish our position firmly in luxury, we will play in the most rewarding, enduring segment of the market. We have the foundations to build on and the team to execute our plans. This will enable us to drive sustainable growth and higher margins over time, while continuing to deliver attractive returns to shareholders”, added Gobetti.
As in the case of other luxury brands such as Louis Vuitton and Hermès, the leather goods category is to become Burberry’s main cash cow. “We are creating relevant product to recruit the new fashion client. One of the most visible ways Burberry can renew brand perception is handbags. Handbags are a sign of prestige, said Judy Collinson, Head of Merchandising at Burberry.
Gobbetti takes over Christopher Bailey as CEO after having collaborated at LVMH’s Celine.