COVID-19 Inhibits Burberry AGM
The Burberry Annual General Meeting (AGM) held on 15 July 2020 was not held in public due to COVID-19. The Burberry Annual General Meeting was short and Gerry Murphy, the Chairman and Marco Gobbetti, the Burberry Group CEO, gave a pre-recorded presentations. Murphy and Gobbetti then answered shareholders’ questions which had been submitted a few days earlier, of which there were very few. Overall, the presentation failed to address key issues facing the brand. Moreover, some part of the presentation was cut out so it made no sense in any way. For example. Burberry’s position in the United States was not explained at all.
Burberry’s Repositioning Strategy
The COVID-19 pandemic hit Burberry at a critical stage in its repositioning strategy, a strategy which focuses on firmly rooting the brand in luxury fashion. After two years of strategic remodelling, Burberry said it was on track to reach the ‘accelerate and growth’ phase of its transformation. However, the economic decline brought on by the pandemic halted the progress of the brand. Burberry has stated that while the overall strategy remains the same, it will now continue to focus on strengthening the brand, completing product transitions, and adapting their strategic initiatives to address the current market. Marco Gobbetti said:
“Now, more than ever, our strategy to secure our position in luxury fashion is key.”
Discounting a high volume of its product in China, a key area of demand, may not be the most appropriate way of securing its position in luxury fashion. Hermes, Chanel, or Louis Vuitton have refused to buckle and have not discounted merchandise. On the contrary, rather than discounting, several real luxury brands have, in effect, increased their prices.
Financial Results – 52 weeks to 28 March 2020
By the end of March 2020, Burberry had closed 60% of its retail stores and factories, and distribution centres were either shut or working at a reduced capacity. Office teams were all working remotely. Burberry’s AGM Report revealed that revenue was £2.6 billion, down 4% and operating profit crashed from £437 million to £189 million.
Burberry’s Recovery
Burberry has been encouraged by the improving sales trends in all regions, specifically the recovery in mainland China and South Korea, where growth in June was ahead of pre COVID-19 levels. Gobbetti believes that this demonstrates the strong momentum that the brand and products have with luxury customers in rebounding economies.
Burberry has capitalised on this momentum by launching a new social retail store in Shenzhen, powered by Tencent technology. The store is designed to entertain consumers of means with exclusive content and personal experiences. Visitors can use Tencent’s WeChat, a social media and messaging app, to interact with the window display, which is a sculptural recreation of the runway for Burberry’s Autumn Winter 2020 show. App users are also able to make appointments with stylists, pre-select clothes, play their own music in fitting rooms and book a table in Thomas’s Café. All products have QR codes, which can be scanned to display additional information. Gobbetti said:
“Together with Tencent, we have pioneered a new concept that will redefine expectations of luxury retail.”
The Future for Burberry
The COVID-19 pandemic has accelerated the connection of online and offline retail. Burberry has had to find new ways to connect with its customers, such as through live streaming and remote selling. These strategies are bound to remain critically important over the next few months as consumers regain their confidence and begin to spend. Burberry needs to continue to engage customers through product initiatives. The brand has said that leather will remain an important part of its offering, building on the substantial trajectory they have established. Gobbetti stated that all efforts will be underpinned by rigorous financial discipline to maintain and secure liquidity as required, whilst leaving space for investments as markets recover.
Post written by Holly Marshall
