New CEO of Burberry Marco Gobbetti Pushes Forward on Vision for the Brand After the Departure of Christopher Bailey

This morning, the new chief executive of Burberry set out his vision for the growth of the company as the company revealed humble increase profit expectations.

The market negatively responded to the idea of Gobbetti to push the brand upmarket, with shares dropping to as much as 1percentnt in early trading, currently down nearly 11 percent at 1,769p.

Overall revenue during the six months to 30 September was up 9 percent to £1.26bn, and the brand obtained a 4 percent growth in comparable store sales.

Pre-tax profits rose to 26 percent to £128m, because of an improved profit margin of 1.6 percent, compared with 12.5 percent during the same period in 2016.

Adjusted earnings per share were up at 32.8p, and the interim dividend was pushed up from 10.5p to 11p.

Because of expected cost savings amounting to £60m and slightly less unfavourable effects from currency rates, Burberry delivered a “marginal” upgrade to projections for the full year.

Following the announcement that Christopher Bailey, the company’s creative chief, and former CEO, will exit the business, various investors were expecting to see some direction from Gobbetti.

Burberry’s new boss published a strategy update in which he said that Burberry would prioritise a product-first approach and digital expansion.

“By re-energising our product and customer experience to establish our position firmly in luxury, we will play in the most rewarding, enduring segment of the market,” said Gobetti.

“We have the foundations to build on and the team to execute our plans. This will enable us to drive sustainable growth and higher margins over time, whilst continuing to deliver attractive returns to shareholders.”

However, no mention was made regarding the departure of Bailey or the succession process, leaving it unclear on who will take creative control of the brand.

Marco Gobbetti described his outlook for 2019 and 2020 in his strategy update, stating that the company anticipates revenue and margins to remain stable. Cost savings and a decrease in the tax rate will offset restructuring costs, said Gobetti.

“There will be a period of transition as we implement our strategy, during which we expect to remain strongly cash generative and are committed to our capital allocation framework.”