Burberry, the luxury fashion brand, is currently grappling with obstacles as it undergoes a design overhaul. The brand has seen a decline in foot traffic to its stores due to the overall slowdown in the luxury market following the initial post-pandemic surge. This decline is impacting Burberry’s revenue forecast. Notably, shoppers in the United States and Europe have become more cautious about splurging on high-end purchases. In addition, China’s appetite for luxury goods has been dampened by a property crisis and soaring youth unemployment rates.

Experts at JPMorgan have pointed out that Burberry faces a particularly challenging position compared to its competitors. The brand is attempting to move upmarket at a time when consumers are becoming more discerning with their spending habits. Jonathan Akeroyd, the Chief Executive of Burberry, has emphasized the importance of increasing the conversion rate of shoppers who actually make a purchase, given the decrease in footfall across the industry.

To generate interest in the brand, Burberry is currently engaged in an aesthetic transformation. It is focusing on offering higher quality and higher priced products. The company has already undergone rapid store refurbishments, unveiling more than one store per week in various locations globally. This massive undertaking has required an investment of approximately £89 million. Additionally, Burberry has reduced the number of department stores that carry its products in order to concentrate on working with higher-end retailers and effectively manage inventory.

The brand has also introduced new styles across a wider price range, with a renewed emphasis on its iconic outerwear. Positive growth has been observed in the accessories category, which includes shoes and bags. Burberry brought in designer Daniel Lee, who gained recognition for his successful work at Bottega Veneta, to spearhead the turnaround efforts. Lee has focused on incorporating the brand’s British roots and has introduced vibrant prints and eye-catching advertising campaigns.

In response to increased competition in the luxury sector, Burberry’s current leadership has ramped up its investment. The company’s costs have already risen by 10% in the first half of the year, and spending is expected to increase further in the second half. Despite this, Burberry’s shares are currently trading at a low valuation, with the lowest price-to-earnings ratio in the luxury sector.

Overall, Burberry’s design overhaul has been impacted by the overall slowdown in the luxury market caused by the pandemic. The brand is currently facing challenges in attracting customers to its stores and converting them into actual buyers. Nevertheless, Burberry remains committed to its strategic efforts and is focusing on protecting areas that directly interact with consumers while simultaneously increasing marketing expenditure. It is anticipated that both Burberry and the rest of the luxury sector will experience negative sentiment over the next 6-12 months.

Useful Links:
1. Burberry Official Website
2. JPMorgan Merchant Services