As Burberry settles into its in-season fashion calendar setup — while other brands, like Tom Ford and Thakoon, shift away — all eyes are on the British fashion house’s September and February runway performances.
In its earnings report for the fiscal year 2016 to 2017, Burberry’s direct-to-consumer fashion show collections saw a lift in sales over the past year, with February’s show sales up 25 percent over September’s. Burberry’s direct retail sales now account for 77 percent of its revenue, with comparable sales up 1 percent. CEO and chief creative officer Christopher Bailey said engagement on social media during February’s show increased by 50 percent in February, and that 30,000 people visited the show’s corresponding in-store display and experience over a seven-day period.
Notably, Bailey, whose CEO role will be turned over to Marco Gobbetti in July, pointed out a strategy around its main runway collections that has reportedly helped drive sales.
“Also driving fashion revenue is a collection of commercial, non-runway products that carry the show’s theme and arrive online and in store at the same time,” Bailey told investors on Thursday. “This enables more customers to buy into the show at a wider range of price points and styles.”
Essentially, Burberry is hoping it can capitalize off its see-now-buy-now show buzz with a collection of lower-priced products that customers don’t have to think too extensively about gobbling up. This evades the question surrounding immediate runway fashion of whether or not luxury products need time between show and sales floor in order to let “desirability build,” as argued by other fashion executives. It also borrows tips from Tommy Hilfiger’s in-season fashion strategy: Through the brand’s lower-priced collaboration with model Gigi Hadid, it can capitalize off its fashion show excitement with an accessible collection.
Burberry just isn’t shouting about the strategy the same way Tommy Hilfiger is.
“I’m not sure what the deal is,” said Luca Solca, head of luxury goods at Exane BNP Paribas. “Having said that, a simpler collection inspired by the runway collection and sold on a see-now-buy-now premise makes sense. But isn’t this exactly what the pre-collection used to be?”
Elsewhere, Burberry saw a revenue slip of 2 percent, to $3.6 billion. Profits fell 21 percent, to $600 million. But shares for the brand rose 3.6 percent on Thursday, a spike that resulted after Burberry announced that it had cut its operating costs by $20 million and was on track to cut $100 million worth of costs by 2019.
Bailey attributed profit and revenue decline to its strategic move to elevate the brand’s positioning as a luxury label. After pulling out of non-premium department stores and promotional activities, wholesale revenue dipped by 14 percent. It also decreased the number of products by 15 to 20 percent in each market, as Burberry is cutting from three labels to one.
“Spending time in product newness and innovation is powerful,” said Julie Brown, Burberry’s chief operating and financial officer. “Discounted wholesale, especially in the U.S., doesn’t position the brand the right way, so we deliberately curtailed. But fashion is performing strongly.”
Solca pointed out that Burberry’s growth is not on par with other brands in the same timeframe, like Gucci and Louis Vuitton, which posted revenue bumps of 51 percent and 15 percent, respectively, in the first quarter. Bailey attributed this to the fashion house’s broader restructuring, which involves cutting products by narrowing selection into one overarching brand label, putting more market spend behind product launches and building out its cross-channel capabilities, like online orders fulfilled in store and same-day shipping.
As it restructures its business, Burberry is leaning into the see-now-buy-now strategy that has fallen out of favor, after big buildup among several fashion players hoping to get closer to customers’ spending habits. Burberry has used Facebook Messenger, WeChat and other platforms to drive excitement to its runway show online. The collections shown in the runway are put on sale immediately following, both online and in stores. While Burberry is still bullish on the strategy, the fact that part of its promise lies in an accessible, runway-adjacent collection is telling.
“The consumer audience is there, they’re ready,” said Elizabeth Stafford, director of business and strategy at digital agency Four32C. “But luxury fashion has a challenge ahead of it: to move successfully into the see-now-buy-now model and retain the sense of exclusivity and scarcity that drive true luxury. It’s going to take time and a lot of failing to do this.”