Burberry, in the midst of a massive restructuring, has yet to reap financial benefits from its efforts to right the ship.
On Wednesday, the British fashion house posted another dismal earnings result, this time for its half-year report. Overall revenue slipped another 4 percent to $1.4 billion, while adjusted profits slipped 24 percent to $181 million during the six-month period ending on September 30.
It’s the continuation of a downward trend: Burberry reported its first half trading update on October 18, and revenue was down 4 percent over last year, to $1.4 billion. In 2015, revenue fell 8 percent.
Christopher Bailey, Burberry’s chief executive and creative officer, attributed the results to the challenging external market, broad changes in customer behavior and a period of internal transition for the brand.
That transition is marked by the brand welcoming a new CEO: Marco Gobbetti will take over the business half of Bailey’s job, while Bailey will stay on as chief creative officer in January. The September 2016 runway show, the brand’s first to feature a customer-facing see-now-buy-now concept, also falls under the changes the company has made to its model.
During the presentation for its earnings announcement, Bailey laid out the progress and focal points of the restructuring strategy the brand laid out in May. Here’s what to take away regarding where Burberry stands, beyond the figures.
Burberry’s internal overhaul has begun
Dividing Christopher Bailey’s dual title into a two-person job is just one step in the internal restructuring that Burberry hopes will make the brand more nimble, efficient and cost effective. This month, the company’s roll out of a single-brand setup will happen, officially bringing Burberry’s several diffusion lines under one brand name and cutting down on the assortment of products.
“We’ve seen an early indication of benefits to our new single-label approach,” said Bailey. “We’re putting better focus on new products, introducing more novelty through personalization, and elevating price points by reflecting construction and design. We have more focused marketing, that showcases our products as much as our brand.”
With that, Bailey said, the company will also move toward a single, unified pool of inventory management across in-store and e-commerce efforts in order to offer better customer capabilities, like buy online and pick-up/return in store.
Personalization is playing a bigger role
Right now, Burberry has a 12 million-person database in its CRM platform. The brand reports that 85 percent of first time in-store visitors are opting into the database. Using that customer information on the micro level is something Burberry is prioritizing both for its mobile strategy and its holiday strategy. In a few weeks, it is rolling out a new version of its mobile app that will connect in-store customers to associates and incorporate more “interactive storytelling” into the in-store experience. Bailey called the app a very personal experience, and said that the company plans to collect consumer data from its users. At Burberry, mobile traffic is more than 50 percent of total web traffic.
Burberry’s most valuable customers will also be receiving personalized holiday gift guides this season that are made with individually chosen product selections and show pre-monogrammed styles. In its slimmed-down product selection, Burberry is putting more of an emphasis on customization, following an industry-wide trend to let customers make luxury their own.
“We’re no longer in a place where a brand can tell you how you’re supposed to look. Everyone, especially young people, likes to put their personal spin on things,” said Michael Miraflor, svp of global head of futures and innovation at Optimedia Blue 449. “There’s a lot of value and cachet in being an individual, rather than seeming like you’re a cookie cutter in a catalogue.”
Burberry plans to bolster its beauty business
Burberry introduced its beauty division in 2013, but the entry-level purchases of lipsticks and fragrances haven’t helped surge sales. In the earnings, the beauty category allotted for 7 percent of overall sales, a decline of 17 percent.
Bailey said that the company would be following a “pillar” strategy for beauty by continuing to build it out into a full product category, starting with fragrance.
Bailey said that while the brand has had successful fragrance launches thanks to an innovative approach to marketing — including a sponsored Snapchat Discover channel for its Mr. Burberry fragrance launch — the perception of the category is off to a strong early start.
In response to Luca Solca, head of global luxury at Exane BN Paribas, who asked if beauty would continue to dilute Burberry’s business, Bailey offered:
“We know there’s huge potential and opportunity here,” said Bailey. “We’re building around key fragrance pillars as well as growing our more nascent makeup business.”
Bailey ended the results report by acknowledging two topics on the mind of investors. He would not comment on speculations that Burberry would merge with Coach, and it was too soon to tell the effects that Brexit would have on the brand.