Burberry

LONDON — For sale.

Burberry has decided to offload the 10 acres of land it owns in Leeds, Yorkshire, where it had proposed building a trenchcoat manufacturing facility but never did.

The plan to build a state-of-the-art trenchcoat factory on land in the center of Leeds was revealed in November 2015 with much fanfare when Christopher Bailey was doing double duty as chief executive officer and chief creative officer.

But it was not to be: In 2017, Burberry axed the plan to build the high-tech textile and clothing manufacturing plant, and on Thursday the company said the land was up for sale.

“We can confirm that we have decided to sell the land we own in central Leeds,” said Julie Brown, Burberry’s chief operating and financial officer. “After a detailed review, we concluded that the site is not suitable to support our plans.”

Brown added the company was committed to Yorkshire and to the U.K., and would continue to invest in its existing manufacturing operations in the towns of Castleford and Keighley, which produce the Burberry Heritage trenchcoats.

The company will continue to grow its shared services center in Leeds, which opened in 2017, Brown added.

Burberry’s shares closed down 2.2 percent to 19.63 pounds on Thursday.

It is understood that Burberry’s decision had nothing to do with Brexit, although it would have been risky to invest in a new U.K. facility at a time when so many brands and designers are shifting operations offshore to avoid potential post-Brexit tariffs.

Despite the Brexit deadline having been postponed to October, there remains much uncertainty about the U.K.’s future trade agreements, if and when the country leaves the European Union.

In January, Brown said Burberry was making detailed preparations for a no-deal Brexit. She said that in a no-deal scenario, Burberry’s supply chain would be disrupted, with the company facing import duties “in the low tens of millions of pounds” on an annual basis. The costs, she said, would hit the brand’s EBIT, or earnings before interest and taxes.

Back in 2015, however, Burberry — and Britain — were in a different mood. The Brexit vote hadn’t yet happened and the Conservatives under Prime Minister David Cameron were going strong — and overly optimistic — that Britons would vote to remain in the EU.

The plan was to open the new factory by 2018, with construction work set to start in 2016. The initial investment in the factory was to have been 50 million pounds.

“It will be a major new weaving and manufacturing facility for our most iconic product — the trench,” Bailey said during a big event at the brand’s Regent Street flagship. “We’re calling it Project Artisan and it reflects our massively important heritage of weaving and producing the trench in England.”

The project was also meant to mark the company’s 160th anniversary.

At the time Bailey said Burberry’s two existing Yorkshire factories, in Castleford and Keighley, which make the heritage trenches, had reached maximum capacity. They were producing double the number of coats compared with five years before.

The new Leeds factory would have allowed Burberry to double the capacity of its trench production, expand other outerwear categories and undertake more sustainable production.

Following the 2015 announcement, George Osborne, Britain’s then-Chancellor of the Exchequer, or chief finance minister, said Burberry’s decision to base the new center “in the heart of Yorkshire, creating hundreds of new jobs in the region, is a massive vote of confidence in our plans to build a northern powerhouse.”

After Britain voted to leave the EU, both Cameron and Osborne stepped down and gave up their parliamentary seats and moved into the private sector. Osborne’s “northern powerhouse” dream floundered.

Burberry, too, underwent seismic changes, with Bailey handing the role of ceo to Marco Gobbetti, and later resigning from the company altogether, making way for the current chief creative officer, Riccardo Tisci.

Under the new management, Burberry’s priorities lay elsewhere, with the company in the thick of a five-year strategic plan that Gobbetti unveiled in 2017.

His overall aim is to reverse the trend of slower growth compared with Burberry’s luxury peers, and he’s looking to achieve “high-single-digit” revenue growth — higher than the 4 to 5 percent that Bain has projected for the sector in the medium-term — and “meaningful” operating margin expansion.

load comments
blog comments powered by Disqus