Burberry to blaze trail with Tencent social retail deal, says H1 saw progress
today Nov 14, 2019
Burberry reported its half-year results Thursday and said it was “pleased” as it talked about a strong response to the collections created under Riccardo Tisci, a strengthening of the brand overall, as well as progress in its transformation strategy.
But the results weren’t the only news the company had and it also told us about an exclusive partnership to develop social retail in China with Tencent. They will “pioneer a concept that blends social media and retail to create digital and physical spaces for engaged communities to interact, share and shop,” we’re told. Burberry will open a social retail store in Shenzhen, China, next year, powered by Tencent technology, “offering unique experiences that connect luxury customers’ social and online lives to their physical environments.”
CEO Marco Gobbetti said: “Social media is becoming such an important part of the luxury customer journey, particularly in the inspiration phase, and retail needs to keep pace with this. We wanted to explore the connection between these touchpoints by merging social media and the store experience to reflect the way luxury customers are engaging with brands. China was the obvious place to start as it is one of the leading hubs for innovation and technology and Chinese consumers are some of the highest users of social media.”
Back with the results, revenue in the 26 weeks to the end of September rose 5% to £1.281bn, or 3% at constant exchange rates (CER). Adjusted operating profit was ahead 5% to £203m and gross profit rose 5% to £865m. Operating profit rose 8% on a directly comparable basis to £202m, or 17% as reported, boosted by currency exchange and IFRS 16. Pre-tax profit was up 11% to £193m, or up 9% on a directly comparable basis.
Comparable retail store sales rose 4% but wholesale revenue declined 2% at CER, or was flat on a reported basis, impacted by the changes the company is making in this area. It saw double-digit growth in continuing luxury accounts offset by non-luxury door closures.
The H1 performance was good in just about all of its regions. Asia Pacific grew by a mid-single-digit percentage, with mainland China up in the mid-teens, Korea in high-single-digits and Japan in mid-single digits. Hong Kong declined in double-digits, however, due to the protests there.
EMEIA grew by a mid-single-digit percentage with even the troubled UK market up in high-single-digits and Continental Europe up in mid-single-digits. The Middle East "returned to growth in Q2 but was negative in the half overall”.
The Americas grew by a low-single-digit percentage with the US up in low-single-digits "with a consistent performance across quarters, whilst Canada and Brazil saw improved trends in Q2”.
This was all helped by Tisci’s collections, which Burberry said have been powering ahead with healthy double-digit growth. His new products now account for around 70% of its mainline retail store offer.
During the half, it meant menswear grew by a double-digit percentage and womenswear by high-single-digits “as full look merchandising continued to drive strength in tops, trousers and skirts”. But the trend in accessories was “softer, albeit it improved significantly through the period with consumers responding positively to newly launched bags”.
Will the good news continue? Well, the company is happy about the reaction to its SS20 collection as global press reach grew by more than 50% year-on-year, total reach on Instagram more than doubled and the show was one of the top five trending topics globally on Twitter.
And Burberry said it has also strengthened its brand momentum, its social-first approach driving double-digit growth in its reach, engagement rate and followers across both Instagram and WeChat.
And its stores seem to be just where it wants them now. In retail, it now has at least one “creatively aligned” store in each major city globally and a cumulative 15 of the smaller, non-strategic stores previously announced for rationalisation, have now been closed.
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