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Burberry (UK)

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Designer label Burberry was rescued from the dusty discount bin in the late 1990s and early 2000s, and transformed back into a major fashion brand, before being successfully spun off by owners GUS as a separate company. Rose Marie Bravo, the CEO who masterminded Burberry's resurrection and quadrupled its sales, stepped down in 2006, but Burberry has retained its momentum. It is one of the very few distinctively British designer fashion labels. However, in an environment now dominated by multi-brand luxury groups, how long can it remain independent? Rumours of acquisition surface periodically, though so far none has materialised for real.


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Brand Analysis

Burberry continues to develop strongly. Its recent collections under former chief creative officer (and onetime CEO) Christopher Bailey received considerable critical acclaim and the move into fragrances did much to extend the popularity of the Burberry brand. As the only truly British fashion brand, Burberry appealed for several years to a downscale audience as an aspirational status symbol, as well as to the more desirable customers for whom it was intended. Attempts were made to limit lower-priced branded accessories, and this strategy appears to have worked. Burberry is no longer seen often on the terraces at football matches. Meanwhile the group has successfully followed the model set by Armani and Ralph Lauren of buying out its various licensees as and when possible to take full direct control. It has also expanded its directly controlled retail estate, thereby reducing its reliance on wholesale channels. However, Burberry's continuing development would make the business a valuable addition to another fashion group's brand portfolio. In 2008, there were reports of interest from both leather goods group Coach and Gucci's parent PPR (now Kering). There were more rumours in 2013 of a possible approach by LVMH, and once again in 2017 of a combination with Coach. So far no deal has materialised.

Burberry is an international luxury brand, originally best known for gabardine raincoats with a distinctive camel, black, red and white checked pattern lining. A status symbol back in the 1940s and 1950s, the brand had grown old and stale by the mid-1990s, favoured primarily by Japanese businessmen. Burberry's biggest problem was that like many other prestige brands of the past (including Gucci and Yves St Laurent), it had been commercialized to death. Although the company retained control of its main range of coats and clothing, the brand - then known as "Burberrys" - had been rented out to a motley group of 33 international licensees who each turned out their own collection of accessories, with little central control of quality or distribution. There were watches in Switzerland, men's suits in Italy, Burberrys biscuits and a Burberrys Visa card in the UK, and even Burberrys whisky in Korea. Asia-Pacific was by far the brand's biggest market. By 1996, more than two-thirds of sales came from Asian shoppers, either travelling abroad or at home, and the brand was one of the top five international fashion brands in Japan. But to milk this popularity, the company was also supplying its goods in bulk to discount "grey market" retailers, who began dramatically under-cutting the prices charged by more upmarket outlets. Prices fell, and so did the brand's perceived value. Without realizing it, the business had become hugely dependent on this market, and when Far East stock markets collapsed in 1996, so did Burberrys' finances.

In 1997, owners GUS recruited new CEO Rose Marie Bravo from US fashion retailer Saks Fifth Avenue with a brief to inject some life into this seemingly moribund brand. Her first move was to drop the unnecessary and over-familiar "s" from the brand to make it just "Burberry". Then she recruited a team of new designers, headed initially by design director Roberto Menichetti (succeeded in 2001 by former Gucci designer Christopher Bailey). Menichetti extended the core product range with the launch of Prorsum womenswear, named in honour of the company's long-standing motto, a Latin proverb meaning "Forwards". The new collections received rave reviews from leading fashion critics, while upscale customers were tempted by unusual new departures, such as customized classic Silver Cross prams (at $2,500 a throw), luxury baby clothes and fragrances. At the same time, international licenses were renegotiated, and the brand took back control of its distribution to ensure availability only in prestige retail outlets, primarily the company's own chain of Burberry and "Scotch House" shops. Several marginal stores were closed, while the main flagship stores were completely remodelled. In 2000, London's Scotch House was the first store to get a facelift, followed by other key outlets in Tokyo and New York.

Both exclusive and expensive once again, Burberry was adopted by a broad selection of celebrities including film star George Clooney, supermodel Claudia Schiffer and Madonna. Burberry was back, and more fashionable than ever before. However high fashion success has its own disadvantages: the brand was also adopted by a less desirable "chav" clientele in the UK, including soap opera actors and football fans (and hooligans) attracted by the brand's British heritage. The company has attempted to shift its focus away from this market, abandoning its lower price baseball caps and some other items, and reducing the prominence of the trademark check among its designs. More recently it has also refined its marketing to present a more distinctive British image, epitomised by the Harry Potter actress Emma Watson, who was featured heavily in the label's 2010 Collections; actor Eddie Redmayne; and from 2013, David & Victoria Beckham's eldest son Romeo.

The Burberry brand is now positioned as a distinctively British fashion label, possibly the only one of its kind at the higher end of the market. There are currently three main collections, covering a wide range of clothing and accessories for men, women and children. Burberry Prorsum is the main ready-to-wear collection for men and women, and is supported by diffusion lines Burberry London (for "wear to work" apparel) and Burberry Brit lifestyle "weekend" clothing. During 2016, however, these three separate lines will be merged in a single unified Burberry label. Burberry Bespoke, launched in 2012, allows customers to customise their own raincoats for an entirely personalised product. There is a separate Burberry Childrenswear line as well as leather goods line Burberry Icons and home accessories range Burberry House. The accessories business is now the group's single biggest overall. Outerwear, including the brand's iconic raincoats, still account for almost half of all apparel sales.

In addition, the group licenses a range of timepieces (manufactured by Fossil, though that deal expires at the end of 2017) and eyewear (now by Luxottica Group, until at least 2025). Burberry Fragrances were originally managed under license by InterParfums. The first of these, Burberry Brit, launched in 2004, and was followed by several variants (such as Burberry Brit Red) as well as more traditional Burberry London, launched in 2006, Burberry The Beat, in 2008, and Burberry Sport in 2010 and so on. Burberry Body launched in 2012, followed by Brit Rhythm in 2013, My Burberry in 2014 and Mr Burberry in 2016. In 2013, Burberry took production and development of its fragrance and beauty range inhouse following the expiry of the InterParfums deal, and subsequently opened its first dedicated beauty store, Burberry Beauty Box. Combined revenues from beauty were £151m in ye 2014. However, with overall performance facing challenges after 2016, the group decided the work involved in managing its own beauty portfolio was too arduous. In Spring 2017, it re-licensed the business to Coty for a fee of £120m and a one-off payment of £50m for the transfer of inventory and other assets.

In Japan, Burberry was obliged to honour long-established licenses held by third parties for the design, manufacture and distribution of a wide variety of apparel and other products under the Burberry name. A greater degree of control was exercised by the revitalised company, but products made and sold in Japan were still significantly cheaper and less sophisticated than elsewhere in the world. The last of these Japanese licenses finally expired in June 2015 and Burberry reacquired that business. As a result, it dropped all lower-priced designs and reduced its retail presence in Japan from around 400 stores to fewer than 30.

The continuing strength of the brand was demonstrated in 2005 when creative director Christopher Bailey was named British Designer of the Year by industry bible WWD. Angela Ahrendts succeeded Rose Marie Bravo as CEO in 2006. One of her first moves was to launch a review of the number of different product lines. As a result, the company reduced the Burberry portfolio from around 6,000 stock items to 4,200, eliminating less profitable products. At the same time, the group has continued to expand its directly controlled retail network, mostly by buying out local licensees in markets including Spain, Taiwan, the Middle East and Hong Kong. The most significant such purchases were of 70 concessions in Spain previously controlled by El Corte Ingles, and of 50 or so local outlets in China.

Total retail value of the products sold under the Burberry name is estimated by the group at around £3bn. The group sells through three channels: wholesale to prestige department stores and speciality retailers; direct to consumers via its own network of 209 upscale mainline stores, 200 department store concessions, and 60 discount outlets. Another 48 stores are operated by franchisees.


Performance improved steadily un the first few years of the 2010s, peaking at £2.52bn for the year to March 2015, while net attributable profits hit £336m. However multiple factors conspired to take the edge of that performance during the rest of 2015, including the slowdown in China and the terrorist threat in Europe. For the year to 2016, revenues slipped back to £2.51bn, while profit fell to £310m.

In the year to 2017, revenues were lifted by currency fluctuation to £2.77bn, though at constant rates they would have slipped back by 2%. Attributable profit fell back once again to £287m, mainly as a result of the scale-back of its beauty business and restructuring expenses. Benefits from the sale of the license to Coty will be reflected in ye 2018.

As a result of the acquisition of previously franchised stores in Spain, Taiwan and the Middle East, revenues from the company's own retail network overtook wholesale for the first time in 2007, and now account for 77% of revenues (£2.13bn in ye 2017). The group has no debt, and net cash of £809m at the end of March 2017.

Europe (and India) accounts for 36% of sales (excluding licensee revenues) in ye 2017, but Asia Pacific is still the single biggest region at 39%. The group generated just £25m in licensing royalties, still mostly from Japan, though those licenses have since been reacquired. Accessories became the group's single biggest business in the year to 2010, and accounted for 38% of total retail/wholesale revenues, or a record £1.03bn, in ye 2017. Womenswear accounted for 29% of the total, and menswear for 23%. The beauty business contributed £184m, but that revenue stream will be wiped out by the Coty sale.


Thomas Burberry opened his outfitter's shop in Basingstoke, Hampshire in 1856, at the tender age of 21. Trading was modest for the next few years, but after his two sons joined the business in the 1880s, Burberry made plans to open a second shop in London. He sold the license to RB Rolls, who opened a Burberry shop in London's Haymarket in 1891, in partnership with the family company.

At around the same time, Burberry was perfecting a tightly woven weatherproofed yarn that could be used to make clothing that was strong and rainproof without also being hot. He called the new fabric 'gabardine', and began making raincoats from it in around 1900. To manage the increased production the company built new fabric mills, and gradually began exporting its clothing abroad through wholesalers in North and Latin America. The group adopted its equestrian knight-in-armour trademark in 1904, and the first international retail outlet was opened in 1909 in Paris. A huge step forward came when Burberry was commissioned to design the standard uniform for officers at the outset of the First World War. This included an adaptation of his standard gabardine raincoat, which became known as a 'trench coat', and enjoyed increasing popularity after the war. It was favoured initially by explorers and other outdoor pioneers: Roald Amundsen was equipped by Burberry for his expedition to the North Pole in 1911; Alcock and Brown were wearing Burberry trench coats on their first manned flight across the Atlantic in 1919. Less pioneering shoppers also adopted the style in a bid to appear more heroic in everyday life. In 1920, Thomas Burberry & Sons Ltd was floated on the London Stock Exchange. The famous Burberry check in camel, black, red and white was first introduced as a lining for the company's rainwear in 1924.

Thomas Burberry died in 1926, but his second son Arthur Michael Burberry continued to run the business until 1951. By this time, Burberry trench coats had reached record levels of popularity as a result of their use by Humphrey Bogart and Ingrid Bergman in Casablanca and subsequently by Audrey Hepburn in Breakfast at Tiffany's. In 1955, in the year that it received its first Royal Warrant from the young Queen Elizabeth II, a controlling stake in the company was acquired by Great Universal Stores, and it became a wholly owned subsidiary in 1966. The business eventually came under the control of chief executive Stanley Peacock during the 1980s. He oversaw the extension of the company's licenses into the developing tourist market, boosting sales in the medium-term, but with an inevitable long-term effect on the brand's status. In 1996, this threat was immediately apparent to the newly appointed chairman of GUS, Lord Wolfson of Sunningdale, widely credited as the man who had built up high street retailer Next during the 1980s and 1990s. Wolfson placed the business under the control of his cousin, Victor Barnett, who set about recruiting a new chief executive to replace Stanley Peacock, who retired in 1996.

Rose Marie Bravo's brief was to duplicate the seemingly miraculous turnaround managed by Tom Ford and Domenico de Sole at Gucci, whereby a once legendary brand was resurrected from Eurotrash status to become a fashion icon. However, her first moves proved both expensive and controversial. Shutting down the supply to the Japanese "grey market" as well as the company's low-priced lines cost almost £17m in inventory, and had an immediate and dramatic effect on sales, already hard hit by the sudden economic slowdown in the Far East. In the year to 1998, sales dropped 7% to £255m, while profits plummeted 60% from £62m to £30m. The financial markets punished GUS for the slump by marking down the group's share price heavily. The situation got still worse a year later as sales dropped to £207m, while profits slipped below £11m. Analysts advised GUS to sell the brand for whatever it could get, but Wolfson stood behind his new CEO.

In the year to March 2000, the results of Bravo's work began to feed through as sales rose to £230m, and profits more than doubled to £22m. A few months later GUS paid €209m to take control of its licensee in Spain, the brand's second largest country of operation behind Japan. The sheer scale of the brand's recovery was unveiled in 2001, when the group reported superb financial results for the year. Sales nearly doubled to £425m, while profits tripled to a record £69.5m. The brand extended its market still further with the launch of a first menswear collection, including jeans featuring the trademark check pattern. New Burberry stores opened in Los Angeles, Duesseldorf and Barcelona, while others were lavishly renovated. In 2002, the company took back full control of its Asia-Pacific distribution, previously handled through agents and licensing agreements. In June that year GUS floated 22.5% of its shareholding in Burberry, valuing the business at around £1bn. A further 10% stake was sold in 2003, and the remaining shares were spun off to GUS shareholders at the end of 2005.

In September 2006, the group became the target of angry protests in the UK when it announced plans to close its factory in Wales with the loss of 300 jobs. Although this seemed in itself only a small story at the time it proved to be surprisingly long-lasting, leading to public letters from various Welsh celebrities arguing against the closure; protests outside several of the company's flagship stores as far away as Paris, Strasbourg and New York; and even a last-minute offer by Harrods owner Mohammed Al Fayed to save the factory. Bizarrely the story was still making headlines six months later in March 2007.

Angela Ahrendts was poached from Liz Clairborne to become CEO in 2006, and successfully oversaw the continuing expansion of the business, in the model established by Rose-Marie Bravo. She stepped down in May 2014 to join Apple, and was succeeded as CEO by Christopher Bailey, already chief creative officer overseeing all aspects of design from apparel to store layout. Following a decline in Burberry's performance, Bailey relinquished the CEO role to new hire Marco Gobbetti in July 2017. He originally announced plans to remain president & CCO. A few months later, Bailey said instead that he would step down in 2018. He was replaced as creative director by Riccardo Tisci, recruited from Givenchy.

Last full revision 16th March 2015

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