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She said that the company has been investing aggressively in the technology for the consumer convenience and for improving the business efficiency. It has successfully linked 100 countries around the world together, all the stores together, and at the same time, it launched the Burberry world which was the company’s global platform. The transactions have been conducted in 45 countries in eight different languages, and in between that, it has modernized stores, which are called retail theatres. All the big screens have content streamed from London, the company can stream its shows into its stores, and there are iPads in the stores as well.
For the growth of the business, no doubt Asia is still the main driver, with the focus on the Chinese market. She said the firm bought the business back about a year ago in China, and now it it has around 30 flagship markets in that country, as it was investing aggressively there. In addition, she saw strong growth in Asia, with no sore spots.
She is betting in America too, with significant investment. She mentioned tearing down the Chicago store, the property owned by the company, a five-story mega structure going on right now due to the opening in October. The company is investing into big wholesale partners in America, and the CEO is feeling positive about America. Northern Europe is going fine. London is one of the company’s best markets. But in southern Europe with Greece, Italy, etc., she’s feeling the impact. The flagship markets in those countries are always somewhat sheltered because of the huge influx of tourism. According to the Angela, day in and day out, Burberry is doing over half of the business to tourism.
Tourism is the driver of so many businesses, not just retail, but also the hotel business and the restaurant business. The firm has really zoned in the critical parts of the places around the world for its business. Angela mentioned that the management team has identified 25 cities around the world where typically they have brought to Burberry around 60% of the total volume. Cities, not countries, and those cities have three things, the huge population density, with more of high net worth individuals live and that is where the tourism goes as well. A lot of investment has gone into the flagship markets right now.
Burberry's performance has been quite consistent. The third quarter this time last year was when the business in America flipped dramatically. It has managed to be up double digit comp. It is the reason why it continued to invest in the U.S. There are a lot of customer bases, but some of it is where the firm is investing heavily in the brand, the brand is pretty present in most of the channels. It is blessed is to have very loyal customers now. And in general, the CEO thinks the foundations of the American economy today are coming back.
Over the years, Burberry has been performing in the stock market quite well, especially if any investors have bought into the stock since the bottom at the end of 2008 at 160 GBX, and now it is staying at more than 1380 GBX, with the advance of more than 8.6 times within just around three years. At the current price, it is trading at 27x earnings and more than 7.7x the book value.
Burberry Group is a holding company, a global luxury goods manufacturer, wholesaler and retailer. The company designs, sources and markets luxury men’s, women’s and children’s clothing and non-apparel accessories globally through the network of retail, wholesale and franchise, digital commerce channels worldwide. In addition, the firm also licenses third parties to manufacture and distribute products using Burberry trademarks. In 2010, Burberry Shanghai took control of key store assets and inventory in 50 retail stores and daily operations at 43 stores, and in the beginning of 2011, the remaining seven stores had all transferred daily operations.
Readers can view the full interview here.
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