Burberry reports on a good quarter as it continues to invest in innovation

Models on the catwalk during  Burberry London fashion week. Photo: Isabel Infantes/PA Wire
Models on the catwalk during Burberry London fashion week. Photo: Isabel Infantes/PA Wire
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BURBERRY Group said it had enjoyed good trading in the first quarter after receiving a positive response to its new products.

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Marco Gobbetti, the company’s chief executive, said: “This was a good quarter in our multi-year journey to transform Burberry. We increased the availability of products designed by Riccardo, while continuing to shift consumer perceptions of our brand and align our network to our new creative vision.

“The consumer response was very promising, delivering strong growth in our new collections. We are on track with our plans and we confirm our outlook for FY 2020.”

The company said there had been an excellent consumer response to Riccardo Tisci’s product with new collections delivering strong double-digit percentage growth compared to prior year equivalent collections.

Burberry said that 2020 is the second year of its multi-year plan to transform the business.

In a business review, the company said: “Our focus in this first phase is on investing to re-energise our brand and aligning distribution to our new positioning, while creating the foundations of a new product offering. Against this backdrop, we made good progress in the quarter as we increased the availability of products designed by Riccardo Tisci and continued to evolve our retail and wholesale network.

“This was the first quarter where the proportion of new product in our stores was meaningful and the response from consumers was very promising. New collections delivered strong

double-digit percentage growth, with all regions ahead of prior year equivalent collections. Consumers responded positively to the new aesthetic and house codes.”

“More widely, on social media our traction across Instagram and WeChat continued to improve, with growth in the number of followers and double-digit gains in the engagement rate per post compared to the previous quarter. In addition, key influencers continued to organically endorse Burberry product and editorial press coverage remained strong.

“In distribution, as planned, we accelerated our alignment programme. In retail, 23 stores incorporated our new creative vision by the end of the quarter and a cumulative nine of the 38 smaller, non-strategic stores previously announced for rationalisation have now been closed. Meanwhile, in wholesale, we continued to rationalise space in non-luxury US doors.

“Finally, we continued to innovate with sustainable raw materials, introducing ECONYL, a yarn created from nylon waste in landfill and ocean plastics into men’s and women’s outerwear. ECONYL can also be recycled and recreated into new products.”

“We maintain our full year 2020 guidance for broadly stable revenue and adjusted operating margin at CER including cumulative cost savings of £120m.”

The statement added: “In terms of comparable store sales growth, mainline is expected to accelerate as the new product builds through the year. However, we anticipate this will be partially offset in the second half of the year by reduced markdown inventory compared to the prior year.

“As we announced at year end, we anticipate a more pronounced weighting of adjusted operating profit in H2 relative to H1 than in the prior year, largely due to a strong H1 comparator in the prior year.”

In May, Burberry revealed that it plans to invest in its Castleford site after putting land in Leeds up for sale.

In 2017, Burberry let an option lapse on the building in Leeds’ South Bank, but the firm still owns the land in Leeds.

Burberry has decided to sell the land and plough cash into its two sites in Castleford and Keighley.

Speaking in May, Julie Brown, Burberry’s chief operating and financial officer, said:“After a detailed review, we concluded that the site is not suitable to support our plans.

“We remain committed to Yorkshire and the UK, and as part of this we will continue to invest in our existing manufacturing operations in Castleford and Keighley, home to our iconic Burberry Heritage trench coat.”

Burberry currently employs more than 400 people in Leeds and 800 at its garment factories in Castleford and Keighley.