Burberry Plunges as CEO Gobbetti's Upmarket Shift Falls Flat

Burberry Group Plc shares plunged as the trench-coat maker’s new Chief Executive Officer Marco Gobbetti disappointed investors with sketchy details of a plan to move the brand upmarket, a shift that could reduce its earnings.
The shares fell as much as 14 percent in early London trading after Burberry said it will add accessories and leather goods and revamp its marketing while investing in store refurbishments. Gobbetti’s plan could cut earnings by 15 percent a year in the 2019 and 2020 fiscal years, Morgan Stanley analyst Elena Mariani said in a note. The company said it expects 15 million pounds ($19.7 million) of one-time restructuring charges in 2019.
Burberry will continue to cut its exposure to “non-luxury” retail outlets as the new chief focuses on fixing Burberry’s business in the U.S., where its brand was diluted by wide availability in department stores and extensive discounting, it said in a statement Wednesday. Creative head and former CEO Christopher Bailey, who’s set to leave next year, had already initiated that change.
“To win with this consumer, we must sharpen our brand positioning,” Burberry said in the statement. “This will require us to change our approach to product, communication and customer experience.”
Gobbetti took over as CEO this year after joining from LVMH’s Celine, where he helped to give the fashion and leather brand an upscale gloss. The move to seek a more exclusive image comes after Burberry streamlined its brand lineup, merging the London, Prorsum and Brit names into its main label. The new chief is expected to provide more details of his plans later Thursday.
The strategy update came as the London-based company reported first-half revenue of 1.26 billion pounds ($1.66 billion), 1.6 percent above the average analyst estimate. First-half revenue rose 4 percent on an underlying basis, above analyst expectations. Growth was strongest in the company’s own stores in the Asia-Pacific region, the company said.
Burberry Plunges as CEO Gobbetti's Upmarket Shift Falls Flat Burberry Plunges as CEO Gobbetti's Upmarket Shift Falls Flat Reviewed by Alexander Von Stern on 00:39:00 Rating: 5