New CEO at Burberry Moving Label More Up-Market

Luxury brand Burberry, based in Britain, will move further upmarket while updating its fashion range more regularly, but shares of the brand were down 11% as investors were more focused on the cost of the plan by new CEO Marco Gobbetti.

The company, which last week announced that is designer Christopher Bailey, who turned the brand into a global label, was leaving in 2018, said it was cutting sales to stores that were non-luxury, first in the U.S. enhancing the exclusivity of the brand.

The company is bringing in more fashion ranges during each new season.

However, shares for the group had dropped by 11% in early Thursday trading in London as it outlined the cost of its transformation, including rationalizing distribution as well as the refurbishing of its stores.

Through the re-energizing of our products and our customer experience that establishes out position squarely in luxury, Burberry will play in the most enduring, rewarding segment of this market, said CEO Gobbetti, who became the brand’s CEO during July after he was recruited away from Celine the French brand in 2016.

CFO Julie Brown said the total costs for restructuring would increase to over £110 million equal to $144 million from the previous estimate of £60 million.

Capital expenditure would be between £150 million and £160 million for the financial years 2019 and 2020, building up to between £190 million and £210 million thereafter, said company officials.

Burberry, which is famous for its camel, red and black check and trench coats, has seen its sales rebound in China, but not at the same rate as those of some of its rivals.

In the U.S., where Burberry suffered from less traffic at many department stores and malls, has been the weak spot for the brand, and sales dropped slightly during the first six month of 2017.

Gobbetti unveiled Burberry’s plan at the same time as the results for the first six months of the year, which saw its revenue increase by 4% to just over £1.26 billion, with its comparable sales up 4%, which was better than had been expected.

Adjusted operating profit increased by 17% to more than £185 million, which beat the forecast of the market that averaged £167 million.

Brown said the new tropical gabardine car coat and trench coat for the group was very popular with shoppers who were fashion-conscious.

Growth was the strongest for the group in mainland China, as Burberry enjoyed a consistent performance for both quarters.