“Modern British luxury” was the headline of new Burberry CEO Jonathan Akeroyd’s strategy, which was revealed during the fashion brand’s interim results in November 2022. Targeting medium revenue growth to £4bn, our Retail Week Prospect analyst team examines Burberry’s plan to unlock this next phase of growth
1. Changes at the top
Burberry has ushered in a period of change, with both a new chief executive and chief creative officer injecting new life into the brand this year.
Jonathan Akeroyd took the helm as chief executive in April 2022. The former Versace boss replaced Marco Gobbetti, who left Burberry four years into his plan to take the brand further upmarket.
Lauded for his part in accelerating Versace’s growth, Akeroyd previously worked at Alexander McQueen and brings with him a wealth of expertise both internationally and closer to home.
Chief creative officer Riccardo Tisci stepped down at the end of September, making way for Bottega Veneta’s former creative director Daniel Lee, who moved into the role in October.
Burberry described Lee as “one of the most exciting British creative talents of his generation”. Prior to his role at Bottega Veneta, he was director of ready-to-wear design at Céline and has worked at Maison Margiela, Balenciaga and Donna Karan.
Akeroyd commented: “Daniel is an exceptional talent with a unique understanding of today’s luxury consumer and a strong record of commercial success, and his appointment reinforces the ambitions we have for Burberry.
“I am excited about working closely with him and I am confident he will have the impact we are aiming for in this next phase, supported by our talented and experienced teams.”
Lee will be pivotal to the success of the new strategy, which sees the luxury brand refocus on its heritage and all-important “Britishness”.
2. Modern British luxury
Akeroyd has set out ambitious plans to make Burberry the luxury British brand with a mid-term revenue ambition of £4bn and a long-term revenue ambition of £5bn in turnover, with operating margins reaching above 20%.
He said: “Our focus in this next phase is on growth and acceleration. We have a clear plan to achieve this across brand, product and distribution, and a very talented designer in Daniel Lee, supported by a passionate team.
“I am confident in our ability to deliver our medium-term targets and realise our potential as the modern British luxury brand. I am excited about what we can achieve in pursuit of our long-term ambition to reach £5bn in revenue.”
The three key elements to his strategy are:
At Burberry’s interim results presentation in mid-November, he said “product matters the most”. The new strategy will be category-focused with the aim to grow accessories to more than 50% of the business and to double sales of leather goods, women’s ready-to-wear and footwear.
Crucial to the renewed product ambition is Lee, who recently shot his first campaign for the brand on a hero category – rainwear. During his time at Bottega Veneta, Lee repositioned its leather goods category and this expertise will be much needed if the brand is to achieve its ambitious category targets.
Within footwear, Burberry aims to more than double sales by creating a new outdoor assortment and embarking on an evolution plan for sneakers.
The luxury accessories market is one of the few forecast to grow over the next five years and Burberry is positioning itself to grab market share.
3. Focus on the physical
Burberry is stepping up its investment in stores, with capital expenditure rising from £115m in 2020/21 to £161m in 2021/22.
In its last financial year (2021/22), 47 stores moved to its newest concept. These included flagships in London, Shanghai, Chengdu and Rue Saint-Honoré in Paris.
Its Paris store spans three floors, where its ground floor is dedicated to the full range of accessories. Its third and final floor houses the biggest private in-store area across Burberry worldwide.
While many retailers may shy away from store investment given continued uncertainty, Burberry is thinking of the future. In 2022/23, it plans to refurbish a further 65 stores, bringing a quarter of its estate to the newest concept.
Burberry’s new strategy, announced by Akeroyd, aims to ensure that all stores are transformed to its newest retail concept by 2026, dedicating a larger footprint to its accessories and outerwear ranges.
Burberry has also harnessed pop-ups to enhance its customer reach and we predict this will continue to be a key platform for the brand over the foreseeable future.
4. Regional diversification
While store refurbishments will accelerate regional growth, disrupted trade due to the pandemic within mainland China has been cause for concern.
Burberry sales rose 11% (or 5% in constant currency) to £1.3bn for the 26 weeks ending October 1, 2022, with growth hampered by lockdowns in mainland China.
Sales within its Asia-Pacific region fell 4% year on year for the period, despite strong growth in Japan, South Korea and South Asia-Pacific, with mainland China experiencing a 19% fall in revenues.
The company described its performance outside of mainland China as “robust”, growing 18% year on year.
Burberry plans to develop a “hyperfocus” on ecommerce within the US and China as part of its strengthened distribution plan. It will also look to broaden its digital reach through selective concession partnerships.
The brand plans to lessen its reliance on mainland China by scaling its business in South Korea and Japan, but it should also look at the opportunities emerging in EMEIA.
Revenue in the EMEIA region grew 34% in the six months to October 1, 2022, benefiting from the return of tourism following a long and difficult period during the pandemic.
While the UK recently performed “in line with the region average”, it presents a large opportunity, especially given favourable foreign exchange rates for tourists and the brand’s aim to strengthen focus on British design.
5. Metaverse matters
Few retailers have kept pace with Burberry when it comes to digitising the shopping experience – investment has been considerable, leading to everything from live-streamed catwalk shows on social media to huge interactive touchscreens in store.
Burberry has positioned itself as a “digital pioneer in luxury”, aiming to reach 15% ecommerce share as part of its medium-term ambition, with metaverse partnerships a crucial part of its digital strategy.
Earlier this year it launched a new augmented-reality (AR) tool, allowing users to virtually place a true-to-scale model of its Lola bag within their environment as well as explore the item through a full 360-view.
As consumers adopt an increasingly digital-first approach, online and offline experiences continue to blur.
Over the past year, it has expanded its focus to all things web3, striking up partnerships with online gaming platforms Minecraft, Roblox and Blankos Block Party, joining brands such as Gucci, Nike and Dior in the metaverse.
Of its most recent partnership with Minecraft, Burberry’s director of channel innovation, Phillip Hennche, said: “By coming together, we hope to connect communities and inspire our consumers with a whole new way to experience our brand.”
This notion of connection is ushering in a new generation of interest and, for many brands, the metaverse presents an opportunity for experimentation while increasing customer loyalty. NFTs (non-fungible tokens) introduce a high-margin opportunity and can create hype through their limited numbers.
Bain & Company predicts that by the end of 2030, digital assets and the metaverse will comprise 5-10% of the luxury market.
With renewed energy and a new team at the top, Burberry has laid out ambitious plans to target its next phase of growth. Prospect estimates revenues to reach £3.7bn by 2026/27.
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