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Burberry to Close Some Stores and Stop Outlets That Are Not Sufficiently Upmarket

Burberry to Close Some Stores and Stop Outlets That Are Not Sufficiently Upmarket

Luxury goods retailer Burberry is planning to close some stores and stop selling in outlets that are not sufficiently upmarket. The new strategy was announced along with its half-year results, which showed like-for-like sales up 4% and a 24% rise in operating profits to £127m.

Burberry has been cutting costs for some time and says it cut out another £20m, giving it savings so far of £40m. Shares in the company fell 12% following the announcement.

The brand said that it intended to focus primarily on luxury shoppers, by creating "compelling luxury leather goods and accessories". It intends to close an unspecified number of non-luxury retail and wholesale stores, as well as refurbishing other stores.

"Today the sector has changed and the luxury consumer demands innovation, curation and excitement from brands and creativity at every turn," Burberry said in a statement.

Its announcement comes just nine days after Burberry's chief creative officer Christopher Bailey, who has been with the brand for 17 years, announced that he would leave the company at the end of 2018, the BBC reports.

Steve Clayton, manager of the Hargreaves Lansdown Select UK Growth Shares fund, which owns shares in Burberry, said: "It's a text-book luxury brand repositioning exercise, which should leave Burberry jostling up against the world's most exclusive names, with the margins to match, but this will take time and in the near term, sales growth will be held back and the group must invest more to achieve its goals. "We think the plan makes sense." City Index also agreed that Burberry's strategy update made sense, but said it was "essentially a profit warning".

"The stock gained more than 40% between mid-June last year and Wednesday's close, as hopes built that installation of CEO Marco Gobbetti, renowned in the luxury world, would accelerate growth, but his sound plan of action appears to offer a lower hurdle for near-term performance than investors expected."

 

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