fashionnetwork.com
Burberry's new CEO faces outlet and pricing dilemmas
Burberry 's new CEO ,
Joshua Schulman , faces a daunting task in reviving the British fashion and luxury brand, whose sales have fallen sharply this year while its share price has fallen 40%, fuelling speculation that the British firm is a possible takeover target.
The luxury sector as a whole is currently struggling, as high interest rates and inflation have increased consumer reluctance to spend. However, Burberry has underperformed its peers.
Yet Burberry shares rose in value on Monday, following a report that Italian brand
Moncler was considering a bid for the British brand. Both companies declined to comment.
Schulman, the company’s fourth CEO in 10 years, previously served in the same top role at
Coach and
Michael Kors and is expected to unveil a new strategy for Burberry when the group reports half-year results on Nov. 14.
Some investors and analysts say Burberry’s roughly 56 outlet stores should be a top priority for Schulman, as they could distract consumers and the market from attempts to push the brand into the luxury high-end.
Burberry uses outlet stores in China, Japan, the U.K. and the U.S. to clear excess inventory and sell last year’s collections of its signature trench coats, plaid scarves and handbags at discounted prices. “Burberry has tried to raise the bar for the brand, but putting it in outlets has undermined and even compromised that strategy,” said
HSBC
analyst Aurelie Husson-Dumoutier. “A trench coat from the 2019 collection is not that different from a similar piece from the 2024 collection, so if I can get it for half the price, why wouldn’t I?” he added. Reducing exposure to outlet stores would be costly for the British company, as they account for nearly 30% of its sales and 50% of its profitability, according to HSBC estimates. But the measure may be necessary if Burberry is targeting the premium end, which would also mean a higher valuation for its share price, analysts say. “If Burberry were to go down the premium route (like Coach), the price-earnings multiple that the market is placing on those brands could be half that of the true luxury players,” said Ashley Wallace, an analyst at Bank of America. “The complication is that Burberry is a bit in the middle right now.” In addition to having had multiple CEOs over the past decade, Burberry has also seen three creative directors in the past seven years, from
Christopher Bailey to
Riccardo Tisci and now
Daniel Lee , each of whom has brought different styles, logos and fonts to the storied label’s signature motifs, which has led to confusion over its brand identity for many. Lee, who joined the label two years ago, made his name at
Bottega Veneta with a series of successful “it shoes” and “it bags,” including the £3,140 ($4,071) “Jodie,” which reinvented the Italian brand’s signature intrecciato leather and appealed to Gen Z shoppers.
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