It’s a challenging time for the luxury sector as profits take a dive due to… well, you know, the usual suspects – Russia, the Middle East, China – all those places that used to be the very reason luxury did so well.
So how about Burberry? Well, on Thursday the UK luxury leader said its comp sales improved in Q3 compared to Q2 and H1 underlying profit rose 3%, much better than anyone had expected. Yippee. Well, maybe it’s not time to strike up the band just yet as that profits hike was more about costs savings than sales growth.
So what exactly is happening out there?
- Adjusted pre-tax profit in the six month to end-September was £152.9m on revenue flat at £1.1bn.
- Burberry chief Christopher Bailey said Chinese sales softened in Q2.
- For Chinese customers, about half of their spend was in mainland China, about 20% in the rest of Asia Pacific (mostly Hong Kong), 25% in EMEIA and 5% in the Americas.
- The Japanese business, which only accounts for around 2% of global revenue (well below luxury peers) benefited from Chinese spend
- Within EMEIA, Burberry saw double-digit percentage growth from travelling Chinese customers in mainland Europe, but more muted growth in the UK (over one-third of the region’s retail revenue), given the strength of sterling against the euro.
And Burberry’s response to all this?
It’s already-announced plan to combine its three Prorsum, London and Brit labels into one Burberry label and it’s also “fast tracking bestsellers” and “optimising” its key products including heritage trench coats, scarves and cashmere. And it’s working to boost areas where it’s still “underpenetrated such as beauty and leathergoods.”
Digital remains crucial for Burberry. As part of the SS16 womenswear show, it partnered with Snapchat to preview the collection the evening before to the platform’s 100m users, with content viewed over 200m times. It also partnered with LINE, Japan’s largest messaging app, to livestream the show and celebrate the launch of Burberry Beauty, offering users the opportunity to purchase a selection of exclusive products directly on the new LINE Pay platform.
Burberry opened an account on Kakao, the largest messaging app in Korea, to share its brand content. And as British music features prominently in all its events, it was the first brand to curate a dedicated channel on Apple Music. It now has about 38m followers across its social media platforms globally, up over 30% on last year.
Burberry is using analytical tools as well to drive more personalised service. Collecting data allows it to reallocate marketing spend more tactically, while protecting investment behind the brand, especially around the new festive campaign. That seems to be working with over 11m views of its festive film across social platforms within first 48 hours.
The company captures data in about 85% of transactions and now has over 10m customers in its database. Its Customer Value Management (CVM) programme is now live in 380 stores globally and enables more targeted, relevant and personalised contact with its most important customers, driving increased conversion and spend. In addition, it’s using data and analytics to further refine its marketing effectiveness in terms of timing, mix and level of investment, reallocating marketing spend to specific customer groups and products as appropriate.
Burberry.com remains at the heart of the company’s digital strategy and it continues to invest. M-commerce sales have tripled and to complement burberry.com, it continues to partner with third parties, “providing a brand appropriate experience to those luxury consumers who want to research and buy online, but on other platforms”. Revenue from third party digital partners in the half was up by a double-digit percentage.
But it’s not all about sexy social media and dry analytics. What’s left? Oh, of course, product! Burberry continues to develop its outerwear offer. Building on the success of the focused heritage trench coat assortment, fully launched in September last year, it has added two new colours, parade red and navy, from this September. It has also seen “early pleasing results” from a new collection of lightweight cashmere trench coats in 14 colours for the autumn season.
It launched the Scarf Bar initiative both online and in store in September, “asserting our ownership of cashmere scarves”. The Scarf Bar offers over 30 colours across both signature and lightweight cashmere fabrications, both solid and check, all available for monogramming online. The launch has been supported by new presentations in-store and online and a dedicated marketing strategy, including customer emails with an image of their own personalised scarf. In the run-up to the key gifting period, in-store training and service initiatives have been introduced focusing on the provenance and craftsmanship of this product.
In beauty, Burberry has expanded its distribution with Sephora globally and with Shiseido in Japan. Burberry make-up launched digitally on Sephora.com in August and was rolled out to an initial 34 Sephora stores, including the Champs Elysées, Paris flagship, with plans to expand the distribution over the next year. As the first phase of the new distribution partnership with Shiseido in Japan, the My Burberry fragrance was launched in June. This was followed by the opening of the first two Burberry Beauty Box counters in department stores in Tokyo and Osaka. These counters, based on the standalone Beauty Box store concept, offer make-up, fragrance and gifting items. Shiseido will continue to open additional counters in Japan, supporting the development of both beauty and the Burberry brand in this market.
And there’s more, but I think that’s enough to absorb for now!