Burberry returns to profit on back of 'back-to-basics' strategy
What's the story
Burberry, the British luxury brand, has reported a pre-tax profit of £19 million for the six months ending September 26. This marks a major turnaround from last year's loss of £48 million. The company's sales also saw an impressive rise to £1.1 billion during this period, according to CEO Joshua Schulman. He attributed this growth to Burberry's "back-to-basics" strategy and strong online and wholesale sales in China and the US.
Sales surge
Sales growth in China and the Americas
Burberry's sales grew by 6% in a "challenging luxury market," with China and the Americas showing particularly strong growth at 15% and 14%, respectively.
However, sales fell by 1% in Europe and the Middle East, partly due to the US-Iran war.
Despite these challenges, Schulman said Burberry's strategy of "pyramid of pricing" from more "affordable" scarves starting at £195 to top-tier bags and coats costing over £9,000 had helped it achieve growth amid a tough market.
Product appeal
Schulman on luxury customers globally
Burberry's lightweight jackets, "tropical" gaberdine raincoats, and the Cotswold range of leather bags and accessories featuring its iconic check have been popular among customers.
Schulman noted that luxury customers globally are getting tired of exorbitant pricing.
He said Burberry's strategy of providing great value for money is resonating strongly with Chinese customers.
"Burberry has always had a somewhat more democratic approach than some of our European peers," he added.
Marketing impact
Burberry's 'Burberry Forward' strategy
Schulman said Burberry has spent two years on its "Burberry Forward" strategy, returning to its historical position at the "sweet spot in the luxury market."
He highlighted investment in locally relevant marketing, such as special products for China's Valentine's Day celebrations this spring and the upcoming Lunar New Year.
Despite global tourism being down, local customers have been spending in their respective regions, a trend Schulman said has been seen all year long.