How Will Burberry Stitch Up Falling Profits? 

By: Georgie Gasiorowski

Illustration By: Paavas Bansal

Why have Burberry’s profits fallen faster than your grandparents fell asleep after Christmas dinner, and what is being done to solve the problem? Whilst Burberry is not alone in its financial dip, its financial report for 2023/24 was eye-watering. Adjusted operating profit fell by a staggering 25% at constant exchange rate (CER) and adjusted diluted earnings per share fell 30% at CER, resulting in their being de-indexed from the London Stock Exchange in September 2024.

Why is Burberry even facing this issue? There are two particularly influential causes. Firstly, there has been a ubiquitous slowdown in demand for luxury goods with similar brands also facing losses. 38% of demand for these goods came from China in 2023, which has experienced an economic slowdown and a cultural shift in attitudes towards luxury potentially underpinning falling profits. In 2022, the government introduced a prohibition on displays of large numbers of luxury items into livestream anchors’ codes of conduct. This initiative is part of a general effort to steer society away from ostentatious behaviours and contributes to a sense of ‘luxury shame’ that dissuades those who can afford expensive goods from buying them or showing them off. Combined with economic difficulties, this is a likely cause for the dip in demand.

While most brands are suffering, some, like Miu Miu, are proving resilient to this trend. Why isn’t Burberry? It may come down to a second, more qualitative factor – the brand’s personality. Burberry’s signature check pattern lost some of its unattainable allure following its association with ‘chav culture’ in the 2000s.  As this trend rose, major department stores, like Harrods, dropped the brand from their shop floors. Following this, ex-CEO Jonathan Akeroyd chose to move away from Burberry’s traditional colours in favour of blue, vowing to uphold the brand’s ‘Britishness’, though this proved unsuccessful. Perhaps the rapid succession of CEOs and creative directors has resulted in an unstable style, preventing establishing a strong brand image. Look to Miuccia Prada’s Miu Miu, and it is clear how a consistent and distinctive style and marketing strategy drives success. Miu Miu’s marketing has been strategic and effective, for example inviting 70 year old frequent customer Dr Qin Huilan to walk their catwalk. This sent the message that their clothes are for everyone irrespective of age and attracted publicity. Essentially, what Miu Miu shows through its designs, branding, and marketing is a creative spirit, something likely to have been developed and sustained by its stable leadership. 

So, what is Burberry doing to turn the tables on its falling profits? Current CEO Joshua Schulman came equipped with his plan; ‘Burberry Forward’. One of the main objectives of this plan is to revisit the pricing structure. Burberry expected demand to increase post-pandemic as shoppers were finally able to return to stores, leading to a bold pricing structure with significant price increases. After all, when it comes to luxury goods, what is considered too much? Unfortunately, demand was not as resilient to the price increase as the brand hoped. Schulman thus brought handbag prices back between £1,500 and £2000 with only the brand’s statement products, like outerwear, remaining boldly priced.

Overall, Burberry’s falling profits have been symptomatic of a larger dip in China’s luxury demand that typically accounts for a significant proportion of luxury goods sales. Though this is a dominant factor, other aspects such as pricing strategy are also influential. I argue that to bounce back, Burberry should look to brands like Miu Miu that boast a strong brand identity that Burberry has been lacking given their conveyor belt of CEOs and designers. 

Georgie examines Burberry's recent sharp profit decline, uncovering why the brand has struggled compared to its high-fashion counterparts and analysing Burberry's attempt to regain profitability.

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How Will Burberry Stitch Up Falling Profits? 

Georgie examines Burberry’s recent sharp profit decline, uncovering why the brand has struggled compared to its high-fashion counterparts and analysing Burberry’s attempt to regain profitability.

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