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Burberry profit falls by more than half over Covid-19

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Burberry’s multi-year turnaround plan has been stopped in its tracks by Covid-19, plunging operating profit 57 per cent to £189 million for the year ending 28 March. Sales declined three per cent to £2.6 billion.

Operations were severely affected by the pandemic with store impairments of £157 million and a writedown of the value of unsold stock by £68 million. Despite reopenings in mainland China, half of the brand’s stores remain closed worldwide as of May. Burberry did not provide guidance for the year ahead and said the quarter to end of June 2020 will be severely impacted with store closures at “near peak”.

“It will take time to heal but we are encouraged by our strong rebound in some parts of Asia and are well-prepared to navigate through this period,” said CEO Marco Gobbetti in a statement. “Now, more than ever, our strategy to secure our position in luxury fashion is key.” The company cancelled its dividend.

The Covid-19 pandemic has hit Burberry at a crucial point in its luxury repositioning plan. New products designed by creative director Riccardo Tisci now represent 85 per cent of the brand’s mainline retail offering and the brand has completed the reduction of its US wholesale network to focus exclusively on luxury doors. Growth was supposed to reach the “acceleration phase” after two years of strategic changes, but that will be tested by the economic downturn brought by the pandemic. Chief Financial Officer Julie Brown doesn’t expect luxury consumption to return to pre-crisis levels anytime soon as economic woes weigh on luxury consumers’ spending and social distancing rules slows trade.

“In this environment consumers tend to focus on strong brands and polarise further between luxury and mass,” said Gobbetti during a call with analysts. “Diminished demand is likely to increase competition and reinforce the importance of investing in brand and inspiration. This makes our strategy to secure our position in luxury fashion even more critical at this time.”

Disruption across the supply chain was also severe, as leather-good manufacturer Burberry Manifattura, the brand’s trench coat factory in Castleford and a major global distribution centre in Italy all closed their doors in March. American and UK logistics hubs remained operative but with reduced hours.

Burberry said mainland China and Korea are showing signs of recovery, with sales in both markets since April ahead versus last year. Still the inability to travel will have repatriated Chinese spending, and the British retailer warned it will take longer for the travelling consumer to return. “We do not expect the recovery trajectory to be the same across markets, especially in the West where it is possible recovery will be slower,” said Gobbetti.

The cost of inventory

The inability to move current stock due to store closures has severely weighed on Burberry operations, bringing inventory provisions of £68 million. The inventory, instead of being sold full price, will reach outlets or employee sample sales. “Under normal course of business we would not make any provisions whatsoever for the latest season,” said Brown.

Models at the Burberry Autumn/Winter 2020 show. 

© Jamie Stoker

To mitigate the impact of stock on the business, Burberry has redirected inventory to those regions that are performing better, namely China and South Korea, by sending stock directly from suppliers to its Hong Kong distribution centre. It will also keep Spring/Summer in store for longer as stores start to reopen in the US and EMEA and focus on local consumers going forward.

“Seventy-five per cent of our business is local globally,” said Brown, who expects the brand will recoup some of the lost Chinese tourist spending through repatriation.

Doubling down on the Chinese consumer

Chinese as a nationality represent 40 per cent of Burberry’s business and are expected to become increasingly important going forward. Sales in the country were up double digits in recent weeks according to Gobbetti. “I would like to say how important we see the Chinese consumer as part of our strategy, in particular we see the Chinese cluster as very important in terms of growth to the industry going forward,” said Brown.

The company is building dedicated planning for the region, including dedicated product launches, social initiatives on local platforms like Xiaohongshu and tailor-made marketing campaigns. The opening of a social retail store in partnership with tech giant Tencent, which was slated for the first half of 2020 in the southern city of Shenzhen, has been confirmed for the end of the year. Gobbetti called it a “fundamental testing ground for the new way in which our consumers will experience our stores” as the connection between offline and online accelerates.

“We will dial up the spend in the markets where we see that they customers have returned to a positive spending, as we are doing now in China,” said Gobbetti.

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Fashion & Style

Victoria Beckham’s Cotswolds kitchen is even more gorgeous than you’d imagine

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Chloe Best




Victoria Beckham‘s kitchen became her home office on Wednesday, as she worked on her latest fashion collection at her house in the Cotswolds. The former Spice Girls star, who is isolating at her second home with her husband David and their children Romeo, Cruz and Harper, shared a look at her relatable work setup on Instagram – and became the envy of her fans in the process.

“My warm weather working from home wardrobe! Shorts & slippers. The dream,” Victoria captioned the photo, which shows her perched at her kitchen island on a wooden stool while wearing a pair of tiny denim shorts and a sweatshirt.

Victoria-Beckham-kitchen-Cotswolds

Victoria Beckham shared a look inside her Cotswolds kitchen

While many followers were envious of Victoria’s toned legs, others couldn’t resist commenting on her gorgeous kitchen. “House goals! The stone flooring is amazing!” one wrote, while a second agreed: “Dream house.”

RELATED: Inside David and Victoria Beckham’s Cotswolds home

It definitely does appear like a dreamy kitchen setup, with stone flooring, exposed brick walls and a bottle green wooden island unit. Copper saucepans hang overhead, while a chandelier adds the ultimate luxurious finishing touch.

Victoria-Beckham-kitchen-pizza-oven

The rustic kitchen also has a pizza oven

A previous photo shared by Victoria has revealed another glimpse at the room, showing a large wood-fired pizza oven on one side, with chopped logs stacked underneath ready to cook. The aesthetic of the room ties in with the rustic feel throughout the rest of the house, which is a barn conversion located close to the celebrity haunt of Soho Farmhouse.

GALLERY: Inside the most beautiful celebrity kitchens

The property boasts beautiful gardens too, where the family can also enjoy barbecues together in the summer, play tennis on their own tennis court, and unwind in their log cabin that houses a sauna and steam room. There is even a plunge pool on the lawn to cool down afterwards. What more could they want?!

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WATCH: 10 of the most stunning celebrity kitchens

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Shoppers Say Thermacell’s Mosquito Repeller Works Wonders

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Vans Classic Slip-On Shoes Are the Most Comfortable on Zappos

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