Economy

Burberry to shut stores that don't meet new luxury standards

Burberry to shut stores that don't meet new luxury standards”

Bailey, the company's chief creative officer, announced October 31 that he plans to leave Burberry in 2018, ending a 17-year stint in which he helped transform the brand into a global luxury icon. "We will build on the strength of our apparel and re-energise it". Cost savings and a reduction in tax rate will offset restructuring costs.

Adjusted earnings per share were up at 32.8p and the interim dividend was nudged up to 11p from 10.5p.

Marco Gobbetti detailed his outlook for 2019 and 2020 in his strategy update, saying that the company expects revenue and margins to remain stable.

Unveiling first-half results, Gobbetti pledged to liven up and increase Burberry's clothing, create luxury leather goods and accessories and revamp stores to make them more appealing.

Adjusted operating profit increased 28% to £185m, beating analysts' average forecast of £167m.

Burberry's new chief executive plans to move the luxury brand more upmarket by increasing its focus on fashion and leather goods and reducing sales to non-luxury outlets. "Digital revenue grew in all regions, led by mobile, while growth was strongest in our own stores in Asia Pacific", he added. However, Korea continued to decline amid a challenging economic environment.

The fashion giant launched Burberry Business Services in Leeds in October, consolidating shared service teams from the UK, Europe, Middle East, India and Africa. The chain said that a benefit from tourist spending in the United Kingdom slowed in the second quarter. A drop in the value of the pound had been attracting tourists to its United Kingdom stores but the annualisation of sterling weakness saw less overseas shoppers spending in the second quarter.

In Continental Europe, Italy remained soft while France and Germany improved in the second quarter.

Burberry lifted its interim dividend by 5% to 11p as free cash flow rose to £171mln from £75mln previous year.

Same-store sales rose 4% for the six months to the end of September, pushing revenues up to £1.26bn.

Due to expected cost savings of £60m and slightly less adverse effects from currency rates, Burberry gave a "marginal" upgrade to projections for the full year.

However, it warned that it was "mindful of the tougher comparative revenue base in the second half".



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