Burberry Mainland Market Performance Is Strong, But Also With "Goose Factory" Tencent To Engage In New Retail.

Despite the tumultuous situation in China's Hongkong, which led to a sharp decline in sales of Burberry in the region, the UK's old brand of luxury goods has exceeded many analysts' expectations, and has achieved remarkable results in the global market.

Group chief executive Marco Gobbetti said at the mid 2019 financial report meeting that the performance in the first half of this year is consistent with expectations, and will maintain the previous year's outlook and full confidence in the development of the second half of the year.

In the 6 months ended September 28, 2019, Burberry's total sales increased by 5% to 1 billion 280 million, while pre tax profits increased by 11% to 193 million pounds.

Mainland China is still the fastest growing and best performing market. With the strong growth in sales in Korea and Japan, the decline in Hongkong has been compensated, and the performance of the Asia Pacific market has been promoted. In addition, Europe and the Middle East market also performed well.

Burberry said that the impact of Hongkong on the group's second quarter business is particularly obvious, and its share of revenue in the group's total revenue has dropped from 8% to 5%. For consideration of staff safety, the group has temporarily closed some Hongkong branches and is discussing with the landlord about the possibility of reducing rent in the future. Julie Brown, group chief operating officer and financial officer, believes that business in the region will inevitably continue to be under pressure in the second half of the year, and will try to turn the main customers from mainland Chinese tourists to Hongkong residents.

On the whole, the 5 year transformation strategy put forward by Gobbetti when he took office in 2017 is steadily advancing, and the chief creative officer, Riccardo Tisci, has contributed. The 70% products currently being put into the retail market come from his design, compared with about 15% in March. Brand sales of men's and women's clothing have achieved a "two digit percentage" growth. Facts have proved that its bold innovation in brand Logo and style design has really won the favor and favor of consumers.

In addition to Tisci's surprise performance for the group, social media and Internet users have become one of the most important marketing channels for Burberry this year. Tiktok, jitter, fast hands and other video platforms have brought hundreds of millions of traffic to the brand. Instagram and WeChat have attracted a lot of attention and interaction between overseas markets and Chinese consumers.

"Social media is becoming an essential part of luxury consumption experience, especially in terms of inspiration, and retail must follow this trend." Gobbetti immediately announced that Burberry and Tencent Inc of China formally entered into exclusive cooperation, which will integrate social media and retail in depth and create a more interactive and shared online and offline shopping space for the consumers and communities involved.

Specifically, Burberry will open a physical store in the Mixc, Shenzhen, China, under the support of Tencent's information technology. It will closely link the offline life and social dynamics of luxury consumers, and is expected to open in the first half of next year. If the result is good, the new retail mode will be extended to other cities in China.

This move is not surprising at all. Burberry has targeted young consumer groups this year and focused on the development of social platforms. Half a month ago, the latest mobile game "B Bounce" has made a good response. Compared with last year, the brand's 2020 carbon and spring and summer fashion show doubled its exposure on Instagram, with an increase of 50%.

Earnings and Tencent cooperation were announced, and Burberry rose 7% in early trading yesterday, the biggest gain since July.

However, Rogerio Fujimori, an analyst at Royal Bank of Canada, and Luca Solca, a consultant at Bernstein company, cautioned that although the current performance is better than expected, the brand needs to continue to demonstrate its strength to maintain this good posture for a long time due to increased external pressure.

Buberry does not seem to worry about this. With the advent of Christmas holidays, the strongest sales growth this year will be achieved in the next third quarters, coupled with the social media development strategy and cooperation with Tencent, the group is confident of its development prospects.