LONDON — In a strategic move aimed at safeguarding its image — and business — in Japan, Burberry has inked a new license with Sanyo Shokai Ltd. for its Blue and Black label collections.
As reported, Burberry plans to take its Japanese business in-house next year when its current license with Sanyo expires. The move is aimed at bringing the Japanese offer upmarket and in line with Burberry’s worldwide distribution.
On Monday, Sanyo announced a new, three-year agreement that sees the British brand licensing its sporty, premium Black and Blue lines, which are both aimed at a younger audience, to Sanyo. Those lines will no longer carry the Burberry name, but will continue to be owned by the British brand.
“As of the end of the spring/summer 2015 season, Burberry’s current license with Sanyo will expire, ending all Burberry London women’s wear and men’s wear licensed products. Sanyo will also transfer its distribution rights to the global collection of Burberry children’s wear to the Burberry Group,” Burberry said on Monday, following a Sanyo news conference in Tokyo.
“Burberry and Sanyo have entered a new agreement under which the Blue Label and Black Label brands will continue, without the Burberry name, from the autumn/winter 2015 season.”
The statement said Burberry would give more details of its plans for the Japanese market on Wednesday, when it announces its full-year results.
Sanyo Shokai president Masahiko Sugiura told reporters that under the terms of the new agreement, the Japanese company can continue to use the “micro” check for the Blue and Black collections, a variation on a Burberry pattern. However, it will not be able to use the Burberry name or equestrian logo. He said the British brand would retain design approval rights over both the Black and Blue brands.
Sugiura said he expects the Blue and Black brands to witness a drop in sales of about 30 to 40 percent, due to the loss of the Burberry name. While Sanyo will continue to develop the brands — via accessories and e-commerce — Sanyo plans to shift its strategic focus to other brands in its portfolio, such as Mackintosh London, Mackintosh Philosophy, Paul Stuart and Epoca, the executive said.
Currently, in Japan, Burberry is chiefly a premium rather than a luxury business. Analysts have projected that it will lose 60 million pounds, or more than $100 million, per year in royalties, when the original license is terminated.
On Monday, J.P. Morgan issued a short report saying the new license for Blue and Black, will be positive to financials. It has projected a 3 percent gain in the 2015-16 year’s earnings before interest and taxes. “But strategically we see a risk of customer confusion in the brand repositioning in Japan,” the bank said.
Morgan added that the Blue and Black labels represent about 50 percent of Burberry’s retail sales in Japan. “We imagine Burberry did this to gain more cooperation from Sanyo Shokai to find wholesale partners for its luxury offer (negotiations with wholesale accounts that we understand were slower than desired),” the bank said.