Having Kate Moss and a member of the house of Windsor star in your brand relaunch campaign is a pipe-dream for most marketers. But they have helped transform Burberry from a tired, old English gents’ outfitters into the hottest fashion label in the land.
Other UK luxury brands are seeking to emulate the two-year turnaround of Great Universal Stores’ (GUS) Burberry, but they may find themselves being sold to foreign conglomerates in the process.
French luxury goods giant Louis Vuitton MoÃÂ«t Hennessey (LVMH) “buys anything that moves”, according to one City analyst, and witnessed a 40 per cent rise in turnover for the first half of 2000, mostly on the back of acquisitions and currency movements (MW last week).
Meanwhile, Burberry more than doubled its profits to £21.7m for the year to March 31, on sales up by 11 per cent to £230m, with the help of new management, design teams, merchandising and advertising. The company is about to open a flagship store on New Bond Street, London, and is extending the brand into swimwear, babywear, homewear and sportswear.
This revival has been spearheaded by Rose Marie Bravo, the US former boss of Saks Fifth Avenue, who was appointed chief executive in 1997 by ex-GUS chairman Lord Wolfson.
One of GUS’s cornerstone strategies has been to buy back Burberry’s licences around the world in order to regain control of the brand. Burberry’s success has offset the poor performance of other parts of the GUS empire.
Earlier this month, the company paid £132m cash to take control of its Spanish licence, its second largest market after Japan. Meanwhile, it has also renegotiated its agreements with Burberry’s 18 licensees in Japan – a move which boosted this year’s profits by £10m.
The rejuvenation of Burberry has fuelled speculation that GUS is preparing to sell or float the company, which analysts believe is worth about £500m.
It has made no secret that Burberry does not fit into its core areas of retail, Internet companies and credit checking. Lehman Bros analyst Andrew Gowan says investors are eyeing Burberry, although it may not be sold: “GUS could just be getting more into the stream of making money from it, although it does seem the odd one out of the company’s brands.”
Gucci, 42 per cent owned by Pinault-Printemps-Redoute, has long been the favourite to buy Burberry, and Gowan agrees that it is the front-runner.
But Burberry is not alone in its recovery: Alfred Dunhill is also witnessing a revival but its owner, Swiss luxury goods group Richemont, has thus far been low-key about promoting the changes.
“Richemont is a quiet achiever. It has done a lot with Alfred Dunhill,” says Gowan.
Only 18 months ago, the company was stuck in the doldrums, losing between $35m (£23.3m) and $40m (£26.6m) a year. Its performance was affecting the rest of the Richemont group, which includes Cartier, 60 per cent of jewellers Van Cleef & Arpels, Montblanc pens and Hackett menswear.
But Richemont forecasts that Alfred Dunhill will break even in this financial year, ending March 2001, and Gowan thinks it may have already surpassed that goal.
Meanwhile, Somerset-based luxury goods company Mulberry is deep in discussions with Club 21, owned by Singaporean tycoon Christina Ong, who is expected to buy a 30 per cent stake in the company for £7m.
The tie-up will enable Mulberry to tap into Club 21’s marketing and distribution network to help build a global presence, although chairman and chief executive Roger Saul will lose the controlling stake in the company he founded. Between 25 and 30 per cent of the stock is listed on the Alternative Investment Market (AIM).
Mulberry is launching a fashion-forward capsule collection in September with gold blouses and goats-suede trousers in conjunction with up-and-coming designer Scott Henshall.
A Mulberry spokeswoman says: “We’re not trying to do a Burberry.”
In the exclusive world of luxury goods, no one is going to admit to copying anyone else. However, they are all desperate to emulate Burberry’s revival – from UK knitwear brand John Smedley, which has an ambitious new retail environment and concession roll-out plan, to quintessential English shoemaker Church & Co, which last year sold an 8.5 per cent stake to Italian fashion house Prada.
Only time will tell whether Burberry and the few remaining UK luxury goods companies can leverage their brands without being sold off to foreign investors.
As one City analyst puts it: “The geographical roots of a brand aren’t important anymore – it’s whether the brand works as a concept and how it is marketed and distributed that will make or break the company.”