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Burberry Had A Tepid First Quarter As It Continues to Streamline Business

Newly announced CEO Marco Gobbetti won't be joining until 2017, but there are plenty of plans to perk things up in the meantime.
Burberry's spring 2016 campaign. Photo: Burberry

Burberry's spring 2016 campaign. Photo: Burberry

Thanks to a little thing called "Brexit" and a wildly fluctuating British pound, Burberry saw reported revenues increase by 4 percent to £423 million (about $561 million) in the three months ending June 30. Comparable sales, however, decreased by 3 percent globally, with each region — the Americas; Europe, Middle East, India & Africa; and Asia Pacific — reporting single digit declines. The U.K., however, saw mid single-digit comparable growth following the "Brexit" decision. 

However, the big Burberry news this week is still the announcement of a new chief executive officer, Celine's Marco Gobbetti, who will relieve current CEO and chief creative officer of his business and financial duties sometime in 2017. The hiring comes after several quarters of struggling sales. Current CFO Carol Fairweather will also be departing in the new executive set-up. "Marco is a luxury retail person, through and through," she said in a call to investors on Wednesday, though she focused on the plans already underway to revitalize business this year. As for Brexit's impact on the company, Fairweather said, "We are a global company and in the short term, we see — other than the FX [foreign exchange] benefit — no discernible impact on operations globally."

Burberry's biggest problems are nothing new. Hong Kong is still dragging down Asia's numbers, but not as badly as in past quarters. Tourism continues to be weak everywhere, in different degrees around the world. Japan's declined traveler spending habits were offset by domestic shoppers. In the U.S. and continental Europe, purchases by travelers were down by double digits. Wholesale demand in the U.S. has also been inconsistent in both beauty and fashion, though sales outperformed replenishment in the latter. 

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So the plan for now continues to follow a strategy outlined in May: focus on product by reducing SKUs by 15 percent and highlight accessories in ad campaigns (see spring 2016's images above); increase retail training and hire more private client sales associates; and continues to invest in digital. A new will launch in the fall and a shopping app is also on the way. All Burberry stores will also fully reflect the consolidated branding by the fall, too, in line with the first in-season runway show

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