Will Burberry Take a New Direction?

A New Direction at Burberry?

  • Burberry reports full-year results April 18
  • The brand’s growth continues to trail peers almost 5 years into an attempted turnaround
  • The market is waiting to see how new chief executive Jonathan Akeroyd might shake up the strategy

When CEO Marco Gobbetti left Burberry last autumn, the British brand’s years-long plan to move upmarket (becoming a sort of British Gucci) remained incomplete. Gobbetti had stabilised the business by pulling out of discount-prone wholesalers and boosted investments in the key handbags category, while creative director Riccardo Tisci provided a sportier, more modern image.

But while the shift to retail solidified the business, top line growth has continued to disappoint. The brand has been losing market share to Kering and LVMH for years, and since the pandemic that gap has widened: for 2021′s holiday quarter, Burberry’s comparable sales were off 3 percent from pre-pandemic levels, while LVMH’s fashion division jumped 51 percent.

When Burberry reports its annual results Wednesday, investors will be looking for an update on the brand’s efforts to catch up while also navigating fresh challenges including China’s coronavirus lockdowns, Russia’s invasion of Ukraine, inflation and market turbulence in the US and Europe.

They’ll also look for hints on how the strategy could evolve from chairman Gerry Murphy and new CEO Jonathan Akeroyd (even if having just arrived at the company, the former Versace chief is unlikely to present in-depth plans before the autumn).

The Bottom Line: Luxury, direct-to-consumer, and fashion-conscious young shoppers are still where the money’s at in fashion. The brand is unlikely to abandon its move upmarket, but investors are keen to know how and when managers hope to make it take off.

Richemont’s Hard Luxury Flex

  • Richemont is expected to report strong results amid surging demand for Cartier jewellery and Vacheron Constantin watches
  • The market is looking for updates on a proposed plan to partner with Farfetch to turn around loss-making e-tailer Yoox Net-a-Porter, which hasn’t budged since November

Swiss luxury group Richemont will release its annual results Thursday. Growth won’t be a problem, as iconic jewellery brands like Cartier and Van Cleef & Arpels, and fine watchmakers like Vacheron Constantin have been scooping up surging luxury demand since the pandemic.

But progress has been slow on spinning off or selling the troubled e-tailing division Yoox Net-a-Porter, which is expected to report an operating loss of as much as €300 million.

Richemont said last November it was in advanced talks to bring on Farfetch as a partner to help turn around YNAP (also potentially spinning it off), but details on the plan remain scant.

The group’s much smaller fashion unit is also struggling, despite bringing in high-level business executives from LVMH and OTB, and investing in creative overhauls at Chloé and Alaïa.

The Bottom Line: Richemont’s sales are booming thanks to its core watch and jewellery brands, but the market would like to see Johann Rupert taking a more “up or out” approach to the rest of the group’s portfolio.

More Than Just ‘The Gucci Show’

  • Kering is set to update investors on strategy across the group
  • Highlighting fast-growing Saint Laurent and Balenciaga offer an opportunity to divert attention from slower performance at flagship Gucci
  • The group will still face tough questions about the outlook for its biggest and most profitable unit

A slower rebound from the pandemic at flagship brand Gucci than at peers like LVMH and Hermès has put Kering in an awkward position: having become one of the world’s biggest and most profitable brands under CEO Marco Bizzarri and designer Alessandro Michele, it’s trickier for Gucci to change the recipe than when the duo radically overhauled the then-floundering brand in 2015.

At an investor day in Paris Thursday, Kering plans to highlight all of its brands — likely in the hopes that the market will learn to embrace the stellar growth (and increasingly considerable scale) of its holdings like Saint Laurent, whose retail sales jumped 49 percent last quarter, or edgier Balenciaga (which is set to fuel the fire of surging US sales with a New York destination show next Sunday).

The Bottom Line: Investor interest is bubbling up regarding Kering’s fastest-growing brands like Saint Laurent and Balenciaga. Kering will try to fuel that shift in perception, but will nonetheless face tough questions regarding its plans for Gucci, which still makes up over 70 percent of profits.

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