The Thomas Burberry Monogram T-shirt

LONDON — Chinese shoppers can’t get enough of Riccardo Tisci’s take on Burberry, shopping around the clock for the brand’s B Series T-shirts and hoodies which have been landing online as limited-editions since September, with the next one set for Nov. 17.

The brand, which on Thursday reported a 42 percent surge in first-half profits and a small dip in sales, said Tisci’s B Series had exceeded expectations, with Chinese customers driving demand.

The first B Series, which dropped shortly before Tisci’s debut London Fashion Week show in September, sold out within four hours, the second one was gone in a few hours and the third, despite landing at 1 a.m. local time in China, disappeared within one hour.

Then there was the one-off scarf that Burberry created for Tmall on Singles’ Day. That flew out quickly, too. Going forward, the B Series product drops will also be available on Kakao in Korea and Line in Japan.

“The fundamentals are still strong in China,” said chief executive officer Marco Gobbetti during Burberry’s interim results presentation at the brand’s Horseferry House headquarters on Thursday.

“Chinese consumers move very often, they’re influenced by fluctuations in currency, but they continue to shop. They may be shopping less in London, and more in Hong Kong or in Seoul, but at this stage we don’t have any significant indicators that there is any slowdown in Chinese nationals’ shopping patterns.”

In the six months ended Sept. 29, Burberry said the Asia-Pacific region grew by a midsingle-digit percentage. Growth was fueled by Mainland China (which grew in the low single digits) and by Chinese spend in Asian tourist destinations such as Hong Kong and Korea. The uptick in sales came despite the problems percolating in China such as tighter border controls, a trade dispute with the U.S. and a slowing economy.

The company called the Chinese consumer “vitally important,” and added that the country would benefit the most from the big store openings that Burberry is planning for 2019. The company declined to give more details about the new Chinese stores.

The Americas region also grew by a mid-single-digit during the six months, while the Europe and the Middle East region was flat year-on-year.

Burberry has boosted its geographic reach to 150 countries from 45 countries via a new deal with Farfetch, which has access to 100 percent of the brand’s inventory.

Burberry added that Asia, its largest single market, still offers a golden opportunity for growth. Gobbetti called out Japan in particular, referring to the market as an “opportunity and a priority. We have been under-distributed there, and we’ve been catching up very quickly,” he said.

B Series, where T-shirts sell for 350 pounds on platforms such as Instagram and WeChat, is just one of Gobbetti’s strategies to address a curious – and impatient – customer base. Going forward, he said, sales will be all about agility and keeping customers’ interest piqued in between the runway collections.

Burberry has also moved on from see-now, buy-now in favor of timed product drops; limited edition, seasonal or themed capsule collections, and a store environment that can be put up, pulled down and switched around. “There are no fixed rules. It’s about agility and newness,” he said of the store interiors.

Tisci’s first runway outing won’t land until February, so in addition to the B Series drops, which arrive each month on the 17th, the designer’s lucky number, there is a December capsule collection with Vivienne Westwood planned, while holiday and Lunar New Year deliveries are also on the way.

“For me, this is the next frontier from the see-now, buy-now, which was clearly going in the direction of the consumer,” Gobbetti said. “But see-now, buy-now became static: It was in the stores early and then it stayed in the stores for three months. It didn’t bring novelty. The important thing is to create novelty for the consumer, very often. Right now this [multi-dimensional way of selling] looks like a very interesting model for us. It’s not without its complications, but so far, so good.”

For the B Series in particular, Gobbetti said the collections are deliberately limited in size and their purpose is to fire up heat around the brand rather than drive significant sales volumes.

In the first half and despite the fact that Burberry has only begun its multi-year transformation under new management, revenues held steady, dipping 3.4 percent at current exchange rates and 2 percent at constant exchange to 1.22 billion pounds.

Stripping out the impact of the beauty business, which was formerly in-house and is now a license with Coty, revenues in the six months were up 3 percent at reported exchange and 4 percent at constant rates.

Profits shot up 42 percent to 132 million pounds as Burberry kept a tight lid on costs and saw unexpectedly strong wholesale revenue growth. Both the profit and revenue figures beat analysts’ projections and Burberry shares closed up 3.2 percent at 18.73 pounds on Thursday.

Wholesale is now expected to be up by a mid-single digit percentage in the full year thanks partly to luxury accounts, some of which have been doubling orders on last year, and to duty free and travel retail sales in Asian tourist destinations. Gobbetti, who has been cleaning up Burberry’s wholesale portfolio with an eye to securing luxury positioning for the brand, said that all of those negotiations have been completed.

Both Gobbetti and Julie Brown, the companyy’s chief operating and financial officer, also offered up some insights into how customers are buying the brand beyond the T-shirts.

At constant exchange, men’s apparel grew 6 percent in the period, followed by women’s apparel at 3 percent and accessories at 2 percent.

Brown said Burberry’s strategy to outfit the client head-to-toe was working well, with double-digit growth in tops and trousers. Car coats and quilted jackets performed better than the trench in the period, she said, as fashion moves towards single-breasted styles.

Gobbetti added that Burberry isn’t putting too great an emphasis on customer age. “It is one of the components we look at, but there are several other behavioral indicators we look at, also. Having said that, I think we have an opportunity to increase sales with some age groups, and Millennials are one of them. Particularly our Chinese customers, and we’ll be doing that going forward, which is why the B Series is important for us.”

B Series, he argued, is ageless. “T-shirts and sweatshirts – this is how people dress today. It’s not an age thing, but a category in itself,” Gobbetti said.

For the full year, which ends in March, Burberry said licensing revenue will rise by 15 million pounds, including beauty, with that figure partly offset by the non-renewal of the watch license.

Burberry added that it’s expecting to report cumulative cost savings of 100 million pounds in fiscal 2018-19, 36 million pounds more than in the previous period.

Gobbetti also addressed Burberry’s plans post-Brexit, although he wouldn’t be drawn on too many details. “We are planning for various different scenarios, and we are looking very seriously at the impact, the complications and the financial and logistical problems that it could potentially bring. A good Brexit deal is what we are hoping for,” he said.

Burberry said in a separate statement Thursday that it had made some changes to the board, with Ron Frasch becoming a member of the audit committee this month and Matthew Key taking a seat on the remuneration committee.

load comments
blog comments powered by Disqus