Burberry aims to slash markdowns to shore up profitability

Bloomberg

Burberry Group Plc is betting there are still enough consumers who would be willing to pay more for its trenchcoats and purses, even amid the pandemic.
The company said it will reduce markdowns, a measure that may hurt second-half sales though should improve long-term profitability. The stock rose as much as 5.8% after first-half sales declined less than expected and Burberry said revenue returned to growth in October.
Burberry aims to upgrade its leather-goods pricing to the levels enjoyed by rivals Prada and Gucci, according to Luca Solca, an analyst at Sanford C Bernstein. Like Prada, Burberry has also been trying to get a stronger grip on
its product pricing by reducing sales to third-party retailers to reduce inventory in the market.
The pandemic is putting the luxury-goods industry through one of its biggest crises yet, leading to an 88% decline in Burberry’s first-half earnings per share.
Wholesale revenue, which represents about a fifth of total sales, dropped 38% in the first half.
Chief Executive Officer Marco Gobbetti put the company on a transformation plan before the pandemic struck, seeking to elevate the quality of its products and woo millennials and younger shoppers.
But Covid-19 heightened the need to shift gears, with the brand announcing in July it would consolidate its offerings around ready-to-wear, accessories and shoes as it cuts 500 jobs.
Burberry shares have lost about a quarter of their value this year, the worst performers among major European luxury-goods stocks.