Is Burberry Once Again Trapped In The Whirlpool Of Acquisition?

Whether it is performance or internal high-level, Britain

brand

Still in turmoil.

Now people in the industry are constantly wondering whether Burberry is once again caught in the whirlpool of acquisitions.

According to the world clothing and shoe net, the 91 year old Belgian billionaire Albert Frere has increased its Burberry holdings from 4% to 6% last Friday after the announcement of the new strategy. This is the second time that Albert Frere has increased Burberry holdings this year.

It is noteworthy that Albert Frere is an independent director of LVMH group.

In February 28th of this year, Albert Frere formally acquired the equity of Burberry Group 3%. After the news came out, Burberry (LON:BRBY) share price rose, the highest increase on that day reached 5.9%, the highest since May 2015.

As Chinese consumers repurchase luxury goods and take back their cosmetics business, Burberry shares have been rising steadily this year, with a cumulative gain of 33%, reaching the highest level in the past 3 years at the end of last month.

However, in the new group CEO Marco Gobetti issued a new strategy, the industry did not receive much positive response.

Burberry shares fell 13% on that day.

Marco Gobetti said in its new strategy that Burberry is still a luxury brand at medium price. Its entry-level products are priced slightly below the entry price of high-end luxury goods, such as Burberry T-shirts priced between 145 and 275 pounds, which is 50% lower than that of top luxury brands.

In the six months ended September 30th, Burberry operating profit surged 24% to 127 million pounds, and sales increased 9% to 1 billion 260 million pounds compared with the same period last year, but still less than analysts expected.

At the same time, Burberry is also affected by the over promotion of department stores in the North American market, which accounts for 20% of the brand's global sales, of which 30% comes from department stores, which is much higher than that of the department stores.

The luxury brand of group and Kai Yun group means that the pricing power of Burberry in luxury goods is very weak.

However, Marco Gobetti stressed that consumers are now being divided into two extremes: luxury goods and popular fashion brands, and the dominant position of the middle end market is no longer.

Therefore, Burberry should evolve to the more high-end luxury brands in the future and regain the price dominance to enhance the profitability of the brand.

To this end, Burberry plans to adjust and innovate its product mix, launch higher priced handbags and accessories, and decide to further reduce the volume of discount outlets such as general merchandise in the future to increase sales of positive prices, but this will cause about 210 million damage to the brand's short-term earnings.

After reviewing and adjusting the past achievements, the sales of handbags products increased most obviously. From March 2016 to September 30th, Burberry's Rucksack, Bridle and New Buckle three handbags became popular products.

Besides regular fashion week, Burberry will show more new designs through other fashion shows.

Burberry predicts that with the advance of the new strategy, brand global sales and profit margins will not increase much before 2021. This is also one of the main reasons why its new strategy is not optimistic by investors.

Some analysts believe that the urgent task for Marco Gobetti is to find a new creative director for the brand.

Christopher Bailey, the incumbent creative director who has joined the Burberry for 17 years, will leave office in March next year and will officially leave Burberry by the end of next year.

Christopher Bailey has always been regarded as the soul of Burberry. Its significance to Burberry lies not only in creativity, but also in the overall control of the brand.

In fact, Burberry has become the brand that constantly leads the trend of digital innovation of luxury brands, and Christopher Bailey has made contributions.

In addition, under the guidance of Christopher Bailey, Burberry has been rated as the most digitalized brand for many years. It is not only the first fashion show to be launched live, but also the first to enter the fashion show and technology cross-border brand.

(extended reading: the latest publication of the luxury brand digital index rankings)

In the eighth US fashion brand digital index report released by L2, the latest business advisory body, Burberry ranked fourth in the composite score of 130, second only to Gucci, Michael Kors and Fendi.

At present, Burberry has exceeded 50 million in the mainstream social media such as Facebook, Instagram, Twitter, WeChat and micro-blog.

After launching the new strategy, Marco Gobetti said it was unable to give specific data on the number of new businesses to be shut down and the number of layoffs, but in the future it would cut other expenses of 120 million to support Burberry's pformation plan.

{page_break}

Last year, Burberry closed 32 stores.

According to the latest news of Daily mail, when Burberry formally launched its new CEO Marco Gobbetti in August, it visited 498 retailers in the world to determine which stores need to be adjusted or closed.

According to sources, at present, 74 stores in the United States have been classified into the category of Customs stores by Marco Gobbetti.

Rogerio Fujimori, an analyst at Royal Bank of Canada, said that the new strategy put forward by Marco Gobbetti needs a lot of time, money and patience, and it is difficult to achieve performance growth in the short term.

Some analysts believe that after Albert Frere shares Burberry, it will implement a series of reform measures to enhance the brand profits, which is in line with the reform strategy announced by Marco Gobetti after the earnings announcement. It is the key reason for Albert Frere's holdings.

As for the changing status of Burberry, there are concerns about whether Burberry will become another Mulberry.

However, Berenberg analysts say that Albert Frere's holdings of shares are positive, or will become a catalyst for Burberry to regain investor confidence.

Due to continued decline in performance, Burberry has been reported to be a potential target for many years.

In 2013, luxury analysts and investment banking analysts said that LVMH had considered buying Burberry. In 2014, a list of European potential acquired company presented by UBS analysts was listed in Burberry.

Last March, when the brand said that mysterious investors had been holding Burberry shares close to 5% of the red line, this event heralded a potential takeover, pushing Burberry shares to a five month high.

At that time, foreign media analyzed that the biggest mystery behind the mysterious buyer was Burberry's rival LVMH group.

Shares of Burberry rose 2.04% last Friday after the news was published, and its market value is about 7 billion 400 million.

More interesting reports, please pay attention to the world clothing shoes and hats net.