Blame it on the leathergoods
After disappointing results, London-based luxury brand Burberry has decided that the best way to turn its fortunes around is to shine far less limelight on leather.
Four months into his tenure as chief executive of Burberry, Joshua Schulman believes he has unlocked the path to recovery. In mid-November, the company reported revenues of just under £1.1 billion for the first half of its current business year, the six months ending September 28, 2024. Compared to the previous year, this figure represented a decline of 22%. There was also a year-on-year decline of 22% in the first quarter of the current business year and this led to the departure in July of previous chief executive, Jonathan Akeroyd, with Joshua Schulman moving from New York to London to take over right away.
A cost-saving programme is in place, starting with the shedding of hundreds of jobs at company headquarters. This will now expand across the whole of Burberry. At the start of this financial year, April 2024, it had 9,169 employees across the world, half in Europe, 36% in Asia, and 14% in the Americas.
With the business sailing through choppy waters, rumours began to spread of a possible takeover, with Moncler much mentioned as a possible buyer. Even some of the analysts who attended the mid-November results presentation mentioned the Milan-based brand by name in their questions. The new chief executive resisted any temptation to rise to the bait. He insists he has his own plan for turning the business around and a key component of it is to lavish less attention on leathergoods.
Authenticity appeal
“We are clearly starting from a very challenging position,” he says. “We have the most opportunity where we have the most authenticity.” This includes leather handbags and footwear, but not at the expense of outerwear, especially the trench-coats and scarves with the Burberry check for which the brand is best known. “In the last couple of years we moved too far away from our DNA and lost our focus,” he says.
“We over-indexed on modern, to the exclusion of our heritage. We prioritised inventory and marketing investments around seasonal fashion moments at the expense of our core categories, resulting in diminished visibility of our core outerwear.”
Price pressure
He makes it clear that his analysis also indicates mistakes in pricing. His view is that Burberry took pricing “too high across the board”, but he singles out leathergoods again as the prime example of where it all went wrong. Chief creative officer, Daniel Lee, arrived from Bottega Veneta in 2022. The company seemed happy with how things were going in 2023, after Mr Lee’s first collection had begun to hit Burberry stores. Sales were up by 3.4% in the first half of its 2023-2024 business year and it calculated in November 2023 that sales of leather bags for the period were up by 14% year on year.
One year on, Joshua Shulman insists that the brand “lacked natural category authority” to charge as much as it was for some of Mr Lee’s bags. The B Shield Tote bag in shearling had an official price of €3,750 at the time of writing. The Large Leather Tent bag in calfskin cost €3,150. “We had a handbag-led elevation strategy,” the new chief executive continues, “focused on handbags at pinnacle pricing and mostly without recognisable signifiers.” He thinks “the zone” in which the brand can do well in the busy world of bags is at price-points between €1,500 and €2,000. And the bags in its forthcoming collections will have “recognisably Burberry signifiers”, he adds. Bags will, therefore, continue to be a Burberry category, but will not be “where we lead”, Mr Schulman says.
Commercial alchemy
His conviction is that where it can lead is in outerwear, which he describes as being at the core of the brand’s “clear and distinct consumer value proposition”. He says: “When I look at the history of value creation at Burberry, it’s clear there was a creative and commercial alchemy, a blend of magic and logic: British heritage juxtaposed with innovation, and outerwear was at the core.” He insists this is a good thing, calling the gabardine material in the brand’s trench-coats the original performance material and describing as an immediate priority the task of reasserting its authority as “the ultimate trench and rainwear destination”.
Joshua Schulman uses the word ‘hero’ as a verb. He says Burberry will ‘hero’ the distinctive check pattern in the lining of its raincoats. It will also ‘hero’ scarves. In fact, his opinion is that scarves are the brand’s “superpower”. Rolling out scarf bars in its stores will be part of the new strategy. As a trial of this idea, there is a scarf bar in its recently reopened store on 57th Street in New York, providing, he says, an inviting candy-store approach to scarves. It also fast-tracked to have ready for the Christmas shopping season a virtual scarf try-on tool for its ecommerce customers.
Next chapter
Ironically, among the bestsellers when the 57th Street store reopened in October were leather trench-coats. One version in calfskin, with shearling trims on the cuffs and collar, has an official price of $10,900. The Burberry chief executive says this “shows the opportunity we have here”. What he means is that these products can command a high price because they are outerwear, not accessories. Outerwear is where the “pricing power” is. At one end of the priority spectrum, therefore, special-edition products at pinnacle price-points will be part of the strategy. The bag offering, in contrast, will concentrate on “branded key shapes” and the price of most items will be under €2,000. In this way, the new chief executive aims to “power this next chapter of this beautiful brand and move Burberry forward”.
Leathergoods will continue to be part of Burberry’s offering, but it will stick to “branded key shapes” and the price of most items will be under €2,000.
All credits: Burberry
