Burberry boss to embark on cost-cutting spree
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Burberry boss to embark on cost-cutting spree

When he was installed in the role of Burberry CEO some 40 days ago, Marco Gobbetti had two clearly defined tasks: return the company’s sales to growth, and cut £100 million in costs by 2019. Well, Burberry did see its sales return to growth at the end of June (up 3%), driven by the UK and Chinese markets, and Gobbetti is now beginning what is described as a “secretive world tour” of the brand’s nearly 500-stores globally. There is little confusion over his purpose: he wants to see where the company’s weak, and axe the offending outlets.

Burberry’s had a great 30 days, seeing its share price rise by 6%

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SOURCE: Yahoo Finance

Gobbetti has a fearsome reputation as someone who is tough on store quality. He built this up in his previous role as chief of French fashion house Celine, where he closed more stores than he opened during his tenure. No doubt, given Burberry’s focus on rapid store openings over the last few years in an effort to meet Chinese demand, he will find some underperformers.

According to This is Money, Gobbetti’s tour is already underway, beginning in the U.S. It makes sense to start here: the region was one of Burberry’s poorest performers last year, seeing a 5% fall in sales, and it has a relatively high number of stores (74).

Meanwhile, as Gobbetti begins the arduous task of chipping away the brand’s dead wood, new growth spurts are emerging in China, a region that was – up until recently – a driver of the company’s performance.

Those two pieces of news, taken together, could spell good fortune for the brand in the near term.

Disclosure

Dominion holds Burberry in its Global Trends Luxury Fund.


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