Burberry’s brand value has declined in the past year as the company grapples with the dual challenges of a luxury economic downturn and a disastrous internal turnaround plan.
Kantar’s annual BrandZ brand value ranking saw Burberry lose nearly $2 billion in brand value compared to 2023. The group was the second biggest loser among the ranking of the UK’s 75 most valuable brands, behind financial adviser St. Petersburg. James’s Place.
The luxury goods industry is battling a decline felt across the board, with buyers taking control of the ‘revenge shopping’ that has rebounded after the Covid-19 pandemic, while the rich have proven they have not been completely insulated from the cost of living crisis.
LVMH’s Bernard Arnault has been bounced from the title of the world’s richest man to the fifth richest man after LVMH shares faced a wipeout. Swiss watchmakers were similarly affected and were forced to put their employees on state-funded leave amid the economic downturn.
The downturn in luxury “makes it extremely important that these brands really stand out from competitors – both high-end and high street – in a way that is relevant and meaningful to shoppers to justify their pricing,” says Adele Jolliffe, Head of Brand Consulting, Insights at Kantar: “This is something Burberry has struggled to do this year.”
Berber conflicts
Unfortunately for Burberry, the decline of luxury products has coincided with continuing internal struggles and a faltering and protracted turnaround plan.
The value of the UK luxury brand has halved until 2024. In July, the company ousted CEO Jonathan Akeroyd after issuing its third profit warning for 2024. It also suspended the dividend, causing shares to fall.
Akeroyd inherited a struggle that many of his predecessors had also failed to unseat: the fearsome reworking of the brand to transform it from mid-range to premium luxury.
Burberry reportedly began laying off hundreds of employees in July, as investors sold the company’s shares.
Dan Coatsworth, an investment analyst at AJ Bell, said last September that the company was vulnerable to takeovers due to its declining value.
The company was dropped from the FTSE100 index – the premier club of the UK’s largest stocks – in August after months of declines in its valuation.
After it was dropped from the FTSE100 in August, Yelena Sokolova, chief equity analyst at Morningstar, It gave her visions In barbaric decline.
The main reasons for Burberry’s decline in value are “large exposure to slow-growing clothing and relatively small exposure in terms of revenue to popular outerwear products,” Sokolova said.
“The unsuccessful push towards advancement in fashion with three changes of creative directors over the past 10 years and a failed push into leather goods, (which is) a very competitive area with strong established players where the Burberry brand is not strong enough.
“(Then there are) the recent price increases that have coincided with a slowdown in luxury purchases and a particular weakness among the aspirational consumer.”
Kantar’s BrandZ ranking tracks how a brand is perceived in the eyes of shoppers, suggesting Burberry’s turnaround plan has not arrived yet.
Sokolova still sees value in the company, raising hopes that it can recover from the difficult and protracted crisis.
“Historically, recessions in luxury never last more than a year or two, and Burberry has an opportunity to reinvent itself with a renewed focus on key outerwear and affordable collections.”
A Burberry representative did not immediately respond Luck Request for comment.
While Burberry fell in the rankings this year, other retailers, including Marks & Spencer, saw a boost in the eyes of shoppers. M&S increased its brand value by 38% compared to 2023.
Kantar’s Jolliffe said Marks & Spencer is seeing “significant improvements in how people see the brand in both grocery and fashion”, including a positive shift in how shoppers think about its clothes compared to competitors.
“We are seeing increasing support for the importance of brand building as boards recognize how important it is to long-term profitable growth.
“What needs to come now is a focus on building brands the right way, and this is where marketers can really prove their value.
“And as this year’s ranking shows once again, it is the brands that differentiate themselves in a meaningful way with consumers that win.”