Burberry Group (LON:BRBY) announced today it is restructuring the Spanish arm of the luxury brand business. The protracted downturn in Spain has meant that it is no longer viable to design and sell collections produced exclusively for this market, the company said. The Spanish collection will therefore be cut and a global collection will take its place.
Best known for its camel, red and black check, Burberry Group is a global luxury brand with a rich heritage and uniquely British image. Headquartered in London, it is listed on the London Stock Exchange and is a constituent of the FTSE 100 index. The Group designs, sources manufactures and distributes luxury apparel and accessories, selling through a diversified network of retail, wholesale, licensing and e-commerce channels worldwide. At 31 December 2009, Burberry had 127 retail stores, 255 concessions, 47 outlets and 96 franchise stores, with e-commerce in over 25 countries. Burberry has identified five strategic themes to underpin its growth: leverage the franchise; intensify non-apparel development; accelerate retail-led growth; invest in under-penetrated markets; and pursue operational excellence.
Retail/wholesale revenue in Spain for the financial year 2008/09 was GBP145m. For the first six months of financial year 2009/10, revenue in Spain at constant exchange rates was down by 37% year-on-year. One of Burberry’s main wholesale accounts is El Corte Ingles.
The announcement today laid out the the restructuring plan as three fold: the introduction of the global collection with effect from Spring/Summer 2010 across all Spanish channels, the termination of the local collection after Autumn/Winter 2010, and the closure of the Barcelona facility - resulting in potential redundancy of approximately 300 staff.
The costs of this scheduled restricting is estimated at between EUR50m-70m. The biggest chunk of these costs will be the writing off of fixed assets and inventory. A more detailed account of the restructuring plan will be given in May 2010, including information on how these changes have influenced profit, loss and cash. The report today confirmed that adjusted group profit before tax for the year 2009/2010 was in line with expectations.
Kate Calvert, an analyst at Shore Capital, commented that:
Spain has been an Achilles heel for Burberry for a number of years, though, after years of underperformance relative to the group, its importance has declined... We believe management has…
