Burberry has announced plans to shift their place up in the market with more high-end products and refurbished stores but is struggling as shares fall and investors are more focused on the cost of the new CEO, Marco Gobbetti’s plan. Last week, Burberry announced that their top designer, Christopher Bailey, is to leave next year following a slash in sales to non luxury stores mostly located in the U.S. in hopes to enhance the brand’s exclusivity.
The company aims to continue to bring out new designs the meet expectations of young shoppers and will also focus on higher margin handbags. However, shares still dropped as much as 14% even announcements of rationalizing distribution and refurbishing stores. Trading was down almost 10% at 17.89 pounds. Burberry forecasts that there will be very little growth in revenue and operating profit until the 2021 financial year as they implement the plan. In recent years, Burberry has been outpaced by Italian and French rivals in the luxury fashion segment of the market.
Total restructuring costs would increase from 60 million pounds to 110 million. Capital expenditure would be 150-160 pounds in the 2019 and 2020 financial years that would build to 190-210 million pounds thereafter.
“I am pleased with our performance in the half with strong double-digit underlying profit growth. Consumers responded positively to fashion and newness, particularly in rainwear and leather goods. Digital revenue grew in all regions, led by mobile, while growth was strongest in our own stores in Asia Pacific. I look forward to building on our strong foundations as we implement our strategy to drive Burberry forward,” said Marco Gobbetti, Chief Executive Officer.