Burberry

LONDON — Britain is buckling up for one wild ride this year, with the Brexit process expected to begin by the end of the March and economic growth set to slow to 1 percent, compared with 2 percent in 2016. Inflation will accelerate due to the pound’s collapse in 2016 against the dollar and euro, although household incomes are unlikely to rise.

The weak pound — a boon for foreign shoppers, a headache for British manufacturers and retailers — is likely to claw back some ground against the dollar by late next year. The big banks, meanwhile, expect consumption — and investment — to slow as Prime Minister Theresa May’s government begins negotiations to extract Britain from the European Union — on the best trading terms possible.

The year will be defined by Brexit and will undoubtedly be filled with angst — political bickering and backstabbing are already rife — but there are those who believe the country can pave a yellow brick road out of Europe.

“I think the challenges we face mean it’s not a bed of roses, no one should pretend that, but equally it is not the end of the world and there are some real opportunities that arise from the fact of Brexit we might take,” former Bank of England governor Mervyn King told the BBC in a recent radio interview.

“Being out of what is a pretty unsuccessful European Union — particularly in the economic sense — gives us opportunities as well as obviously great political difficulties,” he added.

Brexit anxiety, however, has done little to dampen the retail momentum in London, with openings set to mushroom across the capital in the coming months and property developers thinking like the former Bank of England governor: Crisis spells opportunity.

Developers such as The Crown Estate, Tribeca Holdings and Capco are continuing to bankroll the retail revival of neighborhoods including Regent Street; St. James’s; Spitalfields, and Covent Garden, which are now brimming with designer, contemporary, beauty and accessories stores.

In the first quarter of 2017, Tory Burch and Lululemon will both open flagships on Regent Street, the latest in a legion of big North American brands, such as Coach, Stuart Weitzman, and Polo Ralph Lauren, to plant their flags on the central London thoroughfare. Ralph Lauren will also cut the ribbon on a new cafe and bar concept next door to the Polo flagship.

Tory Burch will take up 3,200 square feet of retail space over two floors, and the store will carry the full collection, including beauty, home and watches. The letting is part of a 1 billion pound, or $1.23 billion, investment by The Crown Estate into retail, offices, and leisure businesses on and around Regent Street.

Selfridges, meanwhile, is in the midst of a 300 million pound, or $368 million, facelift: The store is looking to build the world’s largest accessories hall by 2018, a 60,000-square-foot affair that will take up a third of its ground floor space on Oxford Street. Those millions have also gone into an unprecedented number of new openings on the upstairs floors, including the Body and Designer studios and a new contemporary space.

“It’s hard to say that any city can compete with London right now,” said Avery Brooker, cofounder and chief executive officer of Enflux, a London-based company that monitors consumer data and behavior. “There’s a New York pace to the openings — they’re relentless.”

Brooker said the first quarter will likely remain strong with regard to footfall and sales, thanks to the weakness of the pound, which has fallen 20 percent against the dollar since the Brexit referendum in June.

From a British brand perspective, the weaker pound will continue to bring mixed blessings in the New Year.

Tourist spending at Mulberry’s U.K. stores has been robust but the brand, which produces its higher-end bags and accessories at two factories in Somerset, England, still has to source raw materials and components from outside the U.K. and operate overseas subsidiaries. In December, the company said it’s expecting some 1 million pounds, or $1.3 million, in additional costs linked to currency in the 2016-17 fiscal year.

The weaker pound has also been having a big impact on Burberry in its year of cost-cutting and restrategizing. Burberry, too, has wrestled with higher input costs (most of what it sells is not made or sourced in the U.K.) and hiked some of its prices to compensate for the weaker pound.

The currency has been driving tourist purchases at its U.K. stores and will boost the company’s bottom line in the 2016-17 fiscal year. Retail-wholesale profit is set to get a 125 million pound, or $155 million, boost based on Oct. 31 exchange rates in the full year.

The pound aside, there are more Burberry changes in the pipeline. Chief creative officer and ceo Christopher Bailey has said layoffs are “embedded in the plan,” although he has not elaborated on the number — or timing — of job losses linked to the company’s new strategy.

By July, Burberry will also welcome a new ceo in Marco Gobbetti, a luxury business veteran who’s currently serving as ceo of Céline. He is set to tackle the mechanics of the business and fuel retail sales in an ever-competitive luxury environment. Bailey will continue as head of creative and take on the new title of president.

Bailey outlined an austerity plan in May aimed at saving 100 million pounds, or $124 million, by 2019. Burberry has said its overarching plan is to outstrip luxury market growth, which is projected to be 2 to 3 percent in coming years.

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