Burberry's Better Half

Posted by: Charles DuBow on May 28

The Warrior bag is carrying Burberry, instead of the other way around.

Ho ho, what’s this? Burberry Group PLC (BRBY) reported its earnings today and, lo and behold, it had a 15% gain in second-half profit. That should come as a pleasant surprise to its beleagured shareholders who saw the company’s share price sink 16% in January after it announced that it would miss it profit forecast.

The reason for Burberry’s surge was the success of its pricey Warrior bag and the opening of new stores.

The London-based company reported that net income rose to 69.1 million pounds ($136.8 million) in the six months through March from 60.3 million pounds a year earlier. Sales climbed 19% to 546.3 million pounds.

But I am still not entirely sold on the brand. CEO Angela Ahrendts said that they plan to expand more in the U.S. but, despite some good promotion from getting Sara Jessica Parker to wear the label in her new “Sex and the City” movie, I don’t think the brand is as defined as it used to be. That’s not to say it doesn’t make good clothes but I just don’t know what its brand message is. That’s important for a label like Burberry, which has so clearly distanced itself from its previous incarnations. Most of its serious competitors are pretty clearly defined. Chanel is sophisticated, Gucci is sexy, Ralph Lauren is classic, etc, etc.

Using SJP is a smart move and will probably gain it some traction in the short term but longer term it needs to capitalize on their message to consumers. Sure, they could make a big push in Asia but no Western fashion house ever did well in developing markets without first winning over its base at home, which explains their U.S. expansion plans. But given the struggling U.S. economy and the decline in luxury retailing spending, if Burberry wants to succeed here they need to get their message straight.

What do readers think? Am I way off base? Let me know.