With Sales Improving Worldwide, CEO Josh Schulman Is Bullish on the Future of Burberry

Yahoo

3 days ago

LONDON – From colorful scarf bars in stores to campaigns featuring the Jagger clan and VVIP events stretching from Highgrove to the Flamingo Estate, Burberry's charm offensive is working, with sales improving worldwide despite the tough environment for luxury.
The company has successfully stemmed the double-digit sales declines of the past year and outstripped growth expectations for the first fiscal quarter.
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In the three months to June 30, it reported 433 million pounds in retail revenue, a 6 percent drop at reported exchange, and a 2 percent decline at constant rates.
Comparable store sales were down 1 percent, compared with analysts' projections of a 3 percent decline. In the corresponding period last year, comparable store sales were down 21 percent.
Perhaps no one is more surprised than chief executive officer Josh Schulman who joined Burberry last July.
'If you had asked me 12 months ago where we would be today, I wouldn't have imagined the amount of progress that this exceptional team has been making,' said Schulman, adding that brand desirability is also on the rise due to Burberry's focus on 'timeless British luxury.'
He added: 'It's early days, and it's a tough macro, but we are really starting to see the potential of what lies ahead. We're taking things step by step, but we are optimistic about the quarters ahead and optimistic about the business in general.'
Schulman, who has been broadening the price points and appeal of the brand, said the metric he's 'super excited' about is conversion, the ability to turn window shoppers into paying customers. 'Our conversion is up across the world — very significantly — and we're doing so in a tough luxury market,' he said, adding that local customers have been outspending tourists worldwide.
The positive news caps a tough year for Schulman, who is hoping to restore Burberry to its golden days of 3 billion pounds in revenue and an operating margin in the high teens.
As reported in May, the company unveiled an enriched cost-savings plan that could see 20 percent of its workforce eliminated by 2027. The plan is aimed at unlocking 100 million pounds by fiscal 2027, in addition to 40 million pounds revealed last year.
Burberry plans to cut mainly office-based jobs, and will reorganize the schedules of its shop floor staff so they are working during peak traffic hours.
The company is also eliminating the night shift at its factory in Castleford, Yorkshire, where the signature gabardine trenchcoats are made. Around 25 percent of staff will be impacted.
The turnaround is taking shape, although Schulman and analysts said it's still early days.
Bernstein called Burberry's first-quarter performance 'decent, particularly in the context where French and Italian peers are expected to shrink by negative' high-single-digit to double digit, when they report earnings later this month.
'More importantly, company commentary indicates early signs of brand reignition,' said Bernstein, adding that 'the sequential improvement in same-store sales — against a most difficult environment — suggest that things are starting to work.'
The bank also believes that Burberry has a 'more realistic pricing approach in leather goods,' which should help fuel growth going forward.
Deutsche Bank noted that Burberry's shares are up 27 percent so far this year, 'significantly outperforming both larger peers [including LVMH and Hermès] and turnaround peers [Kering and Ferragamo].'
Citi looked farther ahead, speculating that Burberry's underlying retail sales 'could turn positive' in the second fiscal quarter for the first time in two years.
The 'execution is on track, with new [fall and spring] collections and a wider pricing architecture delivered to stores over the next three quarters to reignite brand desirability,' Citi said.
Friday's first-quarter news sent the share price up more than 6 percent to close at 13.27 pounds.
There is even talk that Burberry could rejoin the FTSE 100 index when the London Stock Exchange undertakes its next quarterly review in September.
Burberry fell out of the index, which includes the biggest companies by market capitalization, last September following a 50 percent decline in its share price in the months leading up to the review.
In the first three months, Schulman said growth came from 'sequential improvement' across all regions, thanks chiefly to more enthusiastic local customers.
The Americas rose 4 percent, followed by EMEIA, or Europe, the Middle East, India and Africa region, which rose 1 percent. Greater China was down 5 percent, while Asia Pacific fell 4 percent.
Kate Ferry, Burberry's chief financial officer, said the performance in the Americas, which represents around 19 percent of overall sales, was particularly interesting.
'We actually saw new customer numbers growing in the region, as well as returning customers. We're seeing a much broader range of customers in America, too, which is good,' she said.
She and Schulman stressed that Greater China, which represents 30 percent of sales, has been showing quarter-on-quarter improvement, with sales coming from locals rather than tourists, in line with the overall trends in Asia-Pacific.
Ferry added that 'traffic in the luxury market is challenging everywhere, and tourism is certainly down, but our team in China are really encouraged by all they are seeing. Overall, it's sequentially improving and it remains a really important market for us. We are really, really excited about the future of China,' she said.
Worldwide, bestsellers in the three months included outerwear, particularly lightweight jackets, and items with check trims or with the Burberry Prorsum Knight stamp. In the shoe category, wellies and pool slides also had a strong response from customers as well, Schulman said.
Summer products have been selling at places including The Newt, a 2,000-acre working farm and luxury hotel and spa in Somerset, England. Burberry created a custom check pattern for the hotel as part of a summer partnership, and has been selling swimwear, outerwear, hats, scarves and umbrellas at the boutique.
Burberry has also done a takeover of The Standard in Ibiza, whipping up its signature check in yellow for parasols, loungers and cushions. There's also a big Burberry logo at the bottom of the swimming pool.
The brand is working with The Standard's rooftop bar and restaurant, doing weekly Burberry-curated cocktail evenings, soundtracked by guest DJs spinning from a custom-built booth.
For the VVIPs there were trips to the gardens at Highgrove, King Charles's private home in Gloucestershire, following a collaboration with the estate on a 28-piece capsule collection.
In the U.S., Burberry invited big-spending customers to the launch of the Highgrove collection at the Flamingo Estate, the working farm turned high-end lifestyle destination in Los Angeles.
As the glamorous campaigns and events continue to roll out, there is steady work going on behind the scenes, and in the Burberry C-suites worldwide.
As reported in May, Schulman decided not to fill the role of chief commercial officer and to do the job himself, with Burberry's regional presidents reporting directly to him.
On Friday, along with the first-quarter announcement, Burberry said the four regional presidents will join the executive committee and take part in relevant decision-making, strategy and operations.
They are Claudia Kim in Asia-Pacific; Frank van Loon in EMEIA; Josie Zhang, in Greater China, and Laura Dubin-Wander, in the Americas.
Schulman said the move is meant to align leadership and decision-making more closely with the end-customer. Schulman said the regional presidents' 'market insights and deep customer knowledge are invaluable, and I look forward to continuing to work closely with them to drive' the Burberry Forward strategy.
Looking ahead to the full 2025-26 year, Schulman said the transformation is not like 'turning on a light switch' and will take time.
'It is a multiyear plan with the aim of re-grounding the brand in a timeless British luxury expression. There's so much storytelling that we can do, and we will continue to execute our product strategy, leading with outerwear, earning our authority in other categories, and getting the product and marketing right to appeal to the broad universe of luxury customers.'
Although the company did not comment on the second quarter performance, it said the plan was to prioritize investment and deliver margin improvement 'with a continued focus on simplification, productivity and cash flow. We remain confident that we are positioning the business for a return to sustainable, profitable growth.'
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