Burberry shares plunge on concerns over new high-end luxury strategy

A woman stands in front of a Burberry shop at a shopping mall in Jakarta. Shares in the British fashion icon plunged Thursday after it said sales will stagnate for the next two years. (Reuters)
Updated 09 November 2017
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Burberry shares plunge on concerns over new high-end luxury strategy

LONDON: Shares in British fashion icon Burberry plunged as much as 14 percent Thursday after it said sales will stagnate for the next two years as the company shifts strategy to focus on the high-end luxury market following the departure of designer Christopher Bailey.
Burberry plans to pull back from department stores, starting in the US, and remodel its own shops to enhance “luxury service.” The company said it is responding to a changing market in which the luxury consumer now “demands innovation, curation and excitement.”
Investors were more focused on the cost of the strategy shift, with Burberry saying revenue will remain “broadly stable” for the next two fiscal years and restructuring costs will rise by £51 million ($67 million). Burberry shares fell 9.1 percent in midday trading in London.
“The market is now being asked to back him in a ‘no pain, no gain’ strategy shift,” Steve Clayton, a fund manager at Hargreaves Lansdown in London, said of the CEO, Marco Gobbetti.
“Early evidence suggests (Gobbetti) has not carried the crowd with him.” Bailey, Burberry’s chief creative officer, said on Oct. 31 that he plans to leave the company in 2018, ending a 17-year stint in which he helped transform the brand into a global luxury icon. He previously stepped down as CEO after struggling to reinvigorate sagging sales in the company’s key Asian markets.
Bailey’s ideas influenced all of the company’s operations, from the fashions on the runway to the mood in the stores and a shift toward online marketing.
He banked on Britishness and incorporated it into the look and feel of the offering.
He turned a company that once made trench coats for World War I officers and tents for arctic explorers into the producer of must-have styles for the likes of Kim Kardashian and Cara Delevingne.
He also championed the digital marketplace with innovations such as allowing shoppers to immediately buy online what they saw on fashion show catwalks.
But that didn’t stop Burberry from suffering a sharp fall in sales in Asia, where slower economic growth and a Chinese government crackdown on luxury gifts hurt the brand’s sales under his watch. Investors looked to Gobbetti to jumpstart the company.
“To win with this consumer, we must sharpen our brand positioning,” the company said in its strategy statement. “This will require us to change our approach to product, communication and customer experience. Building on our strong foundations, we will establish our position firmly in luxury enabling us to deliver sustainable long-term value.”


UAE indicates full compliance with US sanctions on Iran

Updated 19 November 2018
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UAE indicates full compliance with US sanctions on Iran

  • The US announced on Nov. 5 a series of sanctions targeting Iran’s banks, shipping sector, national airline and 200 individuals
  • UAE’s trade with Iran, which is expected to decline further, fell to $17 billion in 2017 from a peak of $20 billion in 2013

DUBAI: The United Arab Emirates is fully complying with sanctions imposed this month by the United States on Iran even though it will mean a further drop in trade with Tehran, said a UAE economy ministry official.

Abu Dhabi, the political capital of the UAE federation, has taken a tough stand on Tehran, although Dubai, the country’s business hub, has traditionally been a major trading partner with Iran.

Washington announced on Nov. 5 a series of sanctions targeting Iran’s banks, shipping sector, national airline and 200 individuals after President Donald Trump pulled the United States out of an international nuclear deal with Tehran.

“We are implementing the sanctions,” Abdullah Al-Saleh, undersecretary for foreign trade and industry, said in an interview in Dubai.

 

The UAE is enforcing the US sanction regime “as it is published by the United States,” Al-Saleh said, adding that the relevant authorities would ensure compliance.

Al-Saleh said the UAE’s trade with Iran is expected to decline this year and next year due to the sanctions, after falling to $17 billion in 2017 from a peak of $20 billion in 2013.

Most trade consists of re-exports via Dubai to Iran, which lies across the Gulf.

The sanctions are part of a wider effort by the Trump administration to diminish Iranian influence in the Middle East.

The UAE is among US allies in the Gulf region that staunchly oppose Iranian foreign policy and swiftly backed Washington’s decision. It is also a member of a coalition that is opposing the Iran-aligned Houthi group in Yemen’s civil war.

Compliance will mean UAE companies do not face difficulties in the United States, and the UAE government will look to boost trade with other markets such as Africa and Asia to offset the impact of the sanctions on its own economy, Al-Saleh said, repeating an existing government policy to diversify trade.

Trump’s administration has threatened those who continue to do business with Iran with the prospect of losing access to the US market, although it has given temporary exemptions to eight importing countries to keep buying Iranian oil.

The European Union, France, Germany and Britain, which are trying to save the nuclear deal, have said they regret the US decision and will seek to protect European companies doing legitimate business with Tehran.

FACTOID

The US has given temporary exemptions to eight importing countries to keep buying Iranian oil.