Burberry is cutting between 15 and 20 percent of its product lines in a quest to focus on its newest ranges as it battles to attract shoppers in a volatile luxury goods market. The U.K. luxury-goods maker reported a 24 percent drop in first-half profit that met analysts’ estimates, but failed to match rivals that reported better-than-expected results.
While luxury brands have been struggling with slowing growth in Asia, a drop in tourist spending in Europe following a series of deadly attacks and competition from fast-fashion chains, Burberry has been hit particularly hard. Its adjusted pretax profit fell 4 percent to 146 million pounds ($182 million) in the six months through September, in stark contrast with contrast with those of LVMH, Kering SA and Hermes International SCA, which all beat estimates in their latest reporting periods.
The company had already announced a 4 percent drop in half-year sales to 1.16 billion pounds last month as weak demand in some overseas markets offset a surge in sales in its British home as tourists took advantage of a lower pound.
The brand, which recently removed longstanding creative director Christopher Bailey from his additional role of chief executive offer, bringing in Marco Gobbetti, the former CEO of Céline to hand the business/operational side of the brand. Additionally, Burberry announced in February that it plans move away from the traditional model of presenting seasonal ranges months ahead of their appearance in store, in favor of two collections a year that would be available in shops immediately.
Finance chief Carol Fairweather said on Wednesday the company was cutting back on product lines ahead of the key Christmas trading period and would give greater prominence to its newest products, such as the bridle bag that was a top seller from its September runway show. "We are delighted with everything we have in place for (the) festive (season)," she said in a statement.
Shares in Burberry, along with other luxury groups such as LVMH, fell on Wednesday after Donald Trump's victory in the U.S. presidential election added to uncertainty over prospects for the global economy, analysts said. Burberry makes about 20 percent of its sales in the United States.