Burberry Group plc: Information from Answers.com

Company Perspectives
In 2006, Burberry celebrated its 150th anniversary. We honoured the brand's: Authentic British heritage, rooted in the integrity of our outerwear; broad consumer appeal, across genders and generations; unique democratic positioning within the luxury arena; global reach. This was also an opportunity to take pride in our widely recognized icon portfolio--the trench coat, the trademark check and the Prorsum horse logo.
Key Dates
1856: Thomas Burberry establishes his first shop.
1891: Burberry begins selling clothing under the Burberry name in London's Haymarket section.
1909: The firm registers the Equestrian Knight trademark.
1915: Burberry ships its raincoats to Japan.
1966: The firm becomes a wholly owned subsidiary of Great Universal Stores (GUS).
1994: The company begins using well-known model Christy Turlington in its ad campaigns.
1997: Rose Marie Bravo is hired as CEO.
2000: Burberry breaks ground on a new flagship store in London.
2002: Company goes public.
2005: Parent GUS plc demerges Burberry.
2006: Company celebrates its 150th anniversary.

Type: Public Company
Address: 18-22 Haymarket, London, SW1Y 4DQ, United Kingdom
Telephone: (44 20) 7968 0000
Fax: (44 20) 7318 2950
Web: http://www.burberryplc.com
Employees: 4,651
Sales: £850.3 million ($1.76 billion) (2007)
Stock Exchanges: London
Ticker Symbol: BRBY
Founded: 1856
NAIC: 315230 Women's and Girls' Cut and Sew Apparel Manufacturing; 315220 Men's and Boys' Cut and Sew Apparel Manufacturing; 448140 Family Clothing Stores
SIC: 5651 Family Clothing Stores

Burberry Group plc is a designer, manufacturer, and distributor of luxury and casual men's and women's apparel and accessories. It operates its own retail stores around the world and also distributes its products through concessions and wholesale customers and third-party licenses. The Burberry name is virtually synonymous with the tan gabardine raincoat pioneered by the company more than 150 years ago, and outwear continues to be the company's foundation. An icon of classic clothing, Burberry builds on its traditions to appeal to a younger generation of fashion-conscious customers.

19th-Century Origins

Founder Thomas Burberry was born in 1835 and apprenticed in the drapery trade, establishing his own drapery business in Basingstoke, Hampshire, in 1856. A sportsman, Burberry was dissatisfied with the then-popular rubberized mackintosh raincoat, which was heavy, restricting, and stifling, and thus unsuitable for extended outings. Inspired by country folk's loose smocks, Burberry designed a tightly woven fabric made from water-repellent linen or cotton yarn. Although sturdy and tear-resistant, this "Burberry-proofed" cloth was lightweight and allowed air to circulate, making it considerably more comfortable than the heavy mackintosh. The tailor trademarked his cloth "Gabardine," a Shakespearean term that referred to shelter from inclement weather. Burberry developed five different weights of gabardine: Airylight, Double-Weave, Karoo, Wait-a-bit, and Tropical. He even patented Burberry-proofed linings made from silk and wool.

Burberry was a shrewd marketer, employing trademarking and advertising to great benefit. Illustrated advertisements touting the clothing "designed by sportsmen for sportsmen" drew customers to Burberry's retail outlet, which was established in London's Haymarket section in 1891. Having used a variety of labels to distinguish its garments from imitations, the company registered the Equestrian Knight trademark in 1909. Also employed in the corporate logo, this trademark image represents several Burberry ideals. The armor signified the protection afforded by the outerwear, the "Chivalry of Knighthood" reflected the company's own standards of integrity, and the Latin adverb prorsum ("forward") referred to Burberry's innovative fabrics and styles.

Although the gabardine name was used under exclusive trademark by Burberry until 1917, Britain's King Edward, one of the first members of the royal family to don the gabardine coat, has been credited with popularizing the Burberry name by requesting the garment by name. Burberry garments have enjoyed a loyal following among royalty and celebrities around the world ever since. The company's clientele has included Winston Churchill, Gary Cooper, Joan Crawford, Humphrey Bogart, George Bernard Shaw, Al Jolson, Peter Falk, Ronald Reagan, George Bush, Norman Schwarzkopf, and Paul Newman. The company also boasts warrants (endorsements of quality) from Her Majesty Queen Elizabeth II and H.R.H. The Prince of Wales. Considered a rite of passage by some commoners, a Burberry coat was a prerequisite to a first job interview.

New Products for a New Century

By the turn of the century, Burberry offered an extensive line of outerwear for both men and women. The company designed hats, jackets, pants, and gaiters especially for hunting, fishing, golf, tennis, skiing, archery, and mountaineering. The garments' time- and weather-tested reputation for durability helped make them the gear of choice for adventurers of the late 19th and early 20th century. Balloonists and early aviators wore specially made Burberry garments that let neither wind nor rain penetrate. Captain Roald Amundsen, Captain R. F. Scott, and Sir Ernest Shackleton wore Burberry clothing and took shelter in Burberry tents on their expeditions to the South Pole in the 1910s.

Burberry established its first foreign outlet in Paris in 1910 and soon had retail establishments in the United States and South America. It exported its first shipment of raincoats to Japan in 1915. It was World War I, however, that brought widespread acclamation and fame to Burberry. First worn by high-ranking generals during the turn of the century Boer War in South Africa, the Burberry coat soon was adopted as standard issue for all British officers. With the addition of epaulets and other military trappings, the garments came to be known as Trench Coats, so named for their ubiquity and durability through trench warfare. One Royal Flying Corps veteran wrote a testimonial noting, "During the War, I crashed in the (English) Channel when wearing a Burberry trench coat and had to discard it. It was returned to me a week later, having been in the sea for five days. I have worn it ever since and it is still going strong." The company estimated that 500,000 Burberrys were worn and, perhaps more important, brought home, by veterans.

Rainwear became so important to Burberry that the company soon whittled its lines down to little more than trench coats and tailored menswear for much of the 20th century. The notoriously conservative manufacturer stuck primarily to its well-known raincoats until the 1960s, when a fluke led Burberry to capitalize on the garments' trademark tan, black, red, and white plaid lining. It all started with a window display at the company's Paris store. The shop's manager spiced up her arrangement of trench coats by turning up the hem of one coat to show off its checked lining, then repeated the check on an array of umbrellas.

The clamor for the umbrellas was so immediate and compelling that Burberry's made and quickly sold hundreds. This experiment eventually led to the introduction of the cashmere scarf, also a perennial bestseller. By the 1990s, Burberry offered six different umbrella models and scarves in eight color schemes. This turning point in the company's merchandising scheme notwithstanding, rainwear remained Burberry's single largest line into the late 1970s and early 1980s, and menswear continued to dominate.

Emphasis on Exports and Women's and Children's Apparel: 1980-96

Burberry's export business increased dramatically during the 1980s, fueled primarily by Japanese and American craving for prestigious designer goods. By mid-decade, exports constituted two-thirds of the British company's sales, with more than one-fourth of exports headed to Japan and another 15 percent sold in the United States. By 1996, Burberry had accumulated a record six Queen's Awards for Export Achievement and ranked among Great Britain's leading clothing exporters. Overseas sales continued to grow by double-digit percentages in the early 1990s.

Realizing that "A fine tradition is not in itself sufficient today," Burberry sought to broaden its appeal to a younger, more fashion-conscious female clientele. Acknowledging that "The first thing people think of when they hear Burberry is a man's trench coat," U.S. Managing Director Barry Goldsmith asserted in a 1994 WWD article, "That's the image we're up against." One result was the Thomas Burberry collection, first introduced in Great Britain in 1988 and extended to the United States two years later.

The new merchandise was priced 15 percent to 30 percent less than Burberry's designer lines, bringing a blouse down to $90 versus the normal $150 to $225, for example. Yet it was not just the price tags that set this "bridge line" apart from the brand's more traditional garb. The collection emphasized more casual sportswear, as opposed to career wear. Updated Classics included youthful plaid mini kilts, jumpers, and snug "jean fit" slacks. U.S. advertising executive David Lipman called the line and its model, Christy Turlington, "modernly relevant, yet classically beautiful." At the upper end of the scale, Burberry launched a personal tailoring service for the ladies. The company's women's division grew 30 percent from 1994 to early 1996.

Although it continued to manufacture 90 percent of its merchandise in British factories, Burberry also started licensing its name, plaid, and knight logo to other manufacturers. By the mid-1990s, the Burberry name added panache to handbags and belts, throw pillows and boxer shorts, cookies and crackers, and fragrances and liquor. Childrenswear, stuffed toys, watches, handbags, golf bags, and even a cobranded Visa credit card sported the Burberry check.

Burberry's efforts at product and geographic diversification appeared to be paying off in the mid-1990s. Sales (including a small sister subsidiary called Scotch House) increased by more than one-third, from £200.9 million in fiscal 1994 (ended March 31) to £267.8 million in 1996. Net income before taxes grew twice as fast, from £41.1 million to £70 million, during the same period.

Strengthening the Burberry Brand

Despite diversification efforts, it became clear to company management that the Burberry brand did not have the spark it once claimed. In 1997, Rose Marie Bravo was selected CEO of Burberry. Her expertise in brand management fit in with company plans to strengthen the Burberry brand throughout the United States and Europe. Bravo began focusing on product and design development and hired creative director Roberto Menichetti to lead this initiative.

While the company focused on positioning itself among leaders in the fashion industry, it began facing problems caused by its overdependence on Asian customers. Sales decreased by 7 percent in 1998 and profits tumbled in its retail and wholesale sectors due to the Asian economic crisis. As a major exporter, Burberry also was hurt by the strength of the British pound. The company also began to slow down its shipments to the Asian gray market--a market in which its products were sold cheaply or reimported back to Europe and sold at a discount--and shut down three production facilities in the United Kingdom. Whereas this decision hurt the firm's profits in 1998, management felt it would, in the long run, protect the Burberry image.

In 1999, the company profits continued to falter. Sales decreased by 19 percent as the firm battled its Asian-related problems. Amidst its financial struggles, however, the company continued to focus on brand development and aggressive marketing. Under the leadership of Bravo, Burberry was once again reemerging as an international luxury brand. The company launched its Prorsum collections in 1999, a new designer line that was part of Bravo's strategy. According to a June 1999 Daily News Record article, the launch was, "The latest step in the Bravo-directed makeover of the brand. Over the last 18 months, she's trimmed its distribution, cut the number of licensees, and ramped up marketing and advertising. The goal is to turn the Burberry name into a brand as hip as Gucci, Louis Vuitton, or Prada."

Ups and Downs in the New Millennium

As Burberry entered the new millennium, its financial results improved dramatically. The Asian market recovered, its European and American markets grew, and its new brand strategy began to pay off. Trading profits increased 103 percent over the previous year and sales rose by 11 percent. The company also closed unprofitable stores and opened new stores in Las Vegas, Nevada, and in Tokyo. Burberry also opened a new three-floor flagship store in London that was 16,000 square feet in size and featured new product lines including lingerie and swimwear. A new licensing agreement was signed with Mitsui in Japan, securing a greater share of profits from that region, and the firm acquired its Spain-based licensee; Spain was the firm's second largest market after Japan.

In 2001, Menichetti left the company. The new creative director was 30-year-old Christopher Bailey, a designer from Gucci, who reportedly bought his first Burberry trench coat at a flea market when he was 13 years old. While Menichetti had been responsible only for the Burberry Prorsum line, Bailey would be in charge of all of the company's product design.

In May 2002, GUS plc (Great Universal Stores), Burberry's parent, announced it was selling 22 percent of Burberry stock through an initial public offering (IPO). GUS did not consider the company one of its core businesses, and in light of Burberry's successes, it considered an IPO much more lucrative than selling the firm. That transaction went ahead in July, despite a worldwide market slump resulting from accounting irregularities at several U.S. companies along with the drying up of travel and tourism following the terrorist attack on New York in 2001.

Burberry took several steps to expand sales. It added accessories, including handbags, introduced a line of children's clothing, and offered custom-made trench coats at 30 percent above regular retail prices. The company also bought several of its Asian distributors, thus gaining control of product supply. It also opened new retail stores, including two more flagship locations, in Barcelona, and New York. Noticeable among amenities was the private club area for male customers in the New York store's penthouse.

New Challenges: 2003-05

In less than 12 months, however, Burberry's had sales slowed significantly. In addition to fewer tourists because of the SARS virus and fears of terrorism, it appeared that the Burberry brand had become overexposed. This was painfully obvious as television screens in Britain showed riots led by football hooligans wearing caps and jackets sporting the Burberry check. At one point, the London police even had a special Burberry task force.

Burberry had become a luxury brand, but like many other luxury brands, it was facing major challenges. These high-fashion companies needed to attract new, younger customers to remain profitable within a worldwide luxury retail market estimated to be worth more than $160 billion in 2004. They had to avoid damaging their brands' prestige (and image) in the process, however, and they had to deal with knockoff products. They needed to find a balance between exclusivity and accessibility, between innovation and tradition.

Despite the problems in 2003 and 2004, Bravo and Bailey did succeed in establishing that balance. They kept the plaid alive, but playfully toned it down, offering, for example, swim trunks with the check only inside on the crotch. The company also continued its strong movement into accessories and continued revamping the designs of its lines. Add to these factors a hip marketing campaign, and Burberry became a trendy fashion house. During Bravo's tenure as CEO, between 1997 and 2006, sales exploded from $460 million to $1.3 billion.

In May 2005, GUS announced it would demerge, or spin off, Burberry, transferring its 66 percent share in the company directly to GUS shareholders. That action was worth nearly $2 billion. In October, Bravo announced she would be stepping down when her contract expired in July 2006, and the company named Angela Ahrendts of Liz Claiborne Inc. to be CEO. Bravo remained with Burberry as vice-chairman, a newly created position, until 2007. As this was happening, Christopher Bailey was named Britain's designer of the year.

The company celebrated its 150th anniversary by launching the Icons collection, which incorporated iconic company design elements, such as D-rings, with flourishes such as quilted linings to the classic Burberry look. The collection included handbags (priced at $2,000), shoes, boots, and silk pajamas, as well as its mainstay, outerwear. At the same time, lower-end products, costing less than $50, were less available.

Ahrendts also took aim at the company's less glamorous operations, such as sourcing, production, and delivery, to get products into stores more quickly. In line with those efforts was the company's five-year Project Atlas plan to redesign the company's business processes. Sales for the 2006-07 fiscal year rose 14 percent, with growth across all regions, sales channels, and product lines. Moreover, for the first time, retail became the company's largest distribution channel, over wholesale and licensing.

Burberry's future depended to a great extent on maintaining its customer base, on predicting what products these customers would want, and on the continuing demand for luxury goods. In the meantime, Ahrendts and her team were introducing product lines customers could use every hour of the day, including jewelry and footwear, opening or overhauling stores, presenting new store formats, and moving into under-penetrated markets, including North America and China. The company also sold its headquarters building and began overhauling a former government building in central London. The new headquarters, which would bring all the company's operations under one roof, was expected to open in late 2008.

Principal Competitors

House of Fraser plc; Polo Ralph Lauren Corporation.

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