British luxury brand Burberry will shift further up-market and more regularly update its fashion range but as Kate King reports, its shares dived more than percent as investors focused on the cost of new Chief Executive Marco Gobbetti’s plan.
With items often costing thousands of dollars the average consumer might already consider Burberry a 'luxury' brand, But the UK fashion giant is changing its strategy to ensure it's even more up-market. It plans to focus on leather goods and will stop its products being sold in areas it feels aren't exclusive enough. (SOUNDBITE) PANMURE GORDON, CHIEF ECONOMIST, SIMON FRENCH, SAYING: "I think it is a good strategy, I think luxury brands have been littered in terms of coportate failures and corporate declines by trying to appeal to too mass a market and the lose their USP." Investors weren't so impressed, with shares falling more than 10 percent. The 15 million dollar plan was unveiled alongside Burberry's first half results. It saw its underlying revenue rise by 4 percent to 1.26 billion. While operating profit rose 17% to 185m. A lot has been credited to the company's top designer Christopher Bailey - who last week announced he's leaving the business after 17 years. Meaning new chief executive Marco Gobbetti, will have big shoes to fill. (SOUNDBITE) PANMURE GORDON, CHIEF ECONOMIST, SIMON FRENCH, SAYING: "I think Burberry's attempt to move up the value chain and become more exclusive helps in an ongoing challenge of not having cheaper replication, mass audience and then saturation and decline and we have seen over the last 15 years a number of brands have taken that strategy and subsequently lost the faith of their very valuable high margin consumers." Gobbetti enters the luxury, luxury market at a good time. Worldwide sales are expected to grow 6 percent this year thanks to thriving demand from Chinese customers.