British luxury brand Burberry plans to turn more exclusive. The plan appears to be an attempt to reinvent Burberry as a super-luxe brand, like Hermes and Dior, which have higher prices and margins than Burberry. Currently, Burberry handbags start at about thousand pounds while Hermes starts at three times that price.
It’s a textbook luxury brand re-positioning exercise, which should leave Burberry jostling against the world’s most exclusive names, with the margins to match. Burberry will be taken out of all but the most exclusive stores, starting in the US wholesale channel. Like-to- like retail sales were up four per cent in the six months to September, with the UK growing in double digits. Pre-tax profits also came in ahead of expectations. Overall revenues rose nine per cent. Rain-wear has boosted sales in the past six months, with the car coat and the tropical gabardine particularly popular.
China posted mid teens sales growth while Japan and Hong Kong returned to growth, boosted by Chinese tourists. True luxury brands command immense pricing power and generate fabulous margins and cash flows. They sell to wealthy consumers and just like their customers are more resistant to downturns.
