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PLAID ON THE PLAINS

Burberry brings its luxurious brand to America’s middle markets

By Sean C. Kelly

A little bit more of “brand Britain” is bound for the U.S. heartland.

Burberry, the British luxury fashion and accessories retailer noted for its classic camel, red-and-black plaid check, is ready to boost its U.S. presence with at least 15 new stores and some store-within-a-store units to be situated primarily in the Midwest.

The 150-year-old company, which has just been voted the No. 1 exporter of “Britishness” in a global brand survey, is setting its corporate sights on affluent suburban customers in a number of American towns and cities it has not named.

This growth is to occur under the oversight of the company’s American-born new CEO, Angela Ahrendts. She takes over from Rose Marie Bravo, who becomes vice chairman. Burberry has reportedly earmarked some £50 million (about $95 million) for this expansion, not just into the U.S. but also into Europe and Asia. The company is also reportedly exploring a new format exclusively for men. “The U.S. is an important market for us, and we are excited about the opportunity to grow the business there further,” a spokesman said. “We already have a presence in the Midwest, where we have identified customer demand for further growth.” He was referring to stores in Michigan and Illinois.

Burberry, which operates 130 stores worldwide and about 40 concessions, posted a 19 percent year-on-year increase in first-quarter sales. It has also realized considerable income from licensing and enjoys sales growth from its recently launched Burberry London fragrance line.

Ahrendts, formerly executive vice president of Liz Claiborne, joined Burberry in January. She says she plans to develop Burberry’s brands while reducing what some have called overexposure of the check. The introduction of new brands, such as Equestrian Knight, will broaden the company’s appeal, she says.

These branding strategies come in the wake of problems in the U.K. market. The check design, for example, has become a uniform of the “aspirational unsophisticates” or “Chavs” (the term, whose origin is uncertain but may derive from the Romany word for “child,” is slang for designer-fashion-minded young people from Britain’s lower socioeconomic classes).

Though Burberry operates 35 stores and 14 concession units in the U.S., the expansion plan has raised eyebrows among those who wonder how Midwest locations can possibly compare to the likes of London, Paris or even Barcelona.

But the company views its U.S. strategy as perfectly logical. Company insiders point to Ahrendts’ extensive knowledge of the Midwest (she grew up in a suburb of Indianapolis), her time at Liz Claiborne and Burberry’s cross-family appeal, as well as its already well-established U.S. presence, combined with a knowledge of affluent markets.

U.S.-derived income accounted for about 25 percent of Burberry’s roughly £740 million in sales in the year through March 31. Europe accounted for roughly 47 percent of those sales and the Asia-Pacific for the rest. Last year Burberry separated from parent company Great Universal Stores.

Bravo, formerly president of Saks Fifth Avenue, is credited with turning Burberry around after she joined in 1997. She boosted the company’s total share value nearly 10-fold, to roughly £2 billion today. She took home about £2 million in remuneration last year, not counting company stock.

Such U.S. cities as Cincinnati and Columbus, Ohio; and Indianapolis may be high on the company’s Midwest target list, given that they are choice locations for other upmarket and luxury brands. Handbag and accessory retailer Coach, which just opened a store in Evansville, Ind., might prove an indicator.

Whatever happens, Burberry is unlikely to act with undue haste. Witness its search for prime locations in the Spanish cities of Madrid and Barcelona, which took 18 months. The company is therefore certain to confine its U.S. site searches to only the highest-profile locations.

Ahrendts will be under scrutiny as she pursues Burberry’s image efforts in Britain, where the brand has become associated with down-market behavior and hooliganism. It was bad enough when several years ago a former TV star and her baby were pictured bedecked in Burberry check, inviting a good deal of public ribbing. Then soccer thugs began donning Burberry-emblazoned baseball hats during their outbreaks of disruptive and violent conduct, which led to the banning of anyone wearing Burberry from certain clubs.

Gordon Macmillan, editor of Brand Republic, the online site for Campaign and Marketing magazines, says Burberry knows it has a problem and is working hard to counter it. “Here in the U.K. the brand has faced dramatic challenge with its adoption by the Chavs, who don’t necessarily fit Burberry’s traditional … target market,” Macmillan said. “It has been urbanized by a certain group of people who made it seem tacky.”

Indeed, the checked baseball hats are no longer for sale, and the company has been aggressively pursuing counterfeiters and copyright infringers. But Burberry has been most successful in brand protection by reducing the visibility of the check. This pattern appeared on 25 percent of its merchandise in 2001, but now that is down to 5 percent. The company’s official position is that the noncheck apparel has grown because customer demand for it has grown.

The results of Burberry’s expansion and brand strategy to date may best be summed up by a Business Week/Interbrand global brand survey done in July, in which Burberry joins such world icons as Armani, Bulgari, Levi’s and Prada.

“They [Burberry] look very well set up,” said Nick Liddell, director of brand valuation Interbrand, a global brand consulting firm. “One of the hardest things about managing a brand responsibly is to strike a balance between image and sales. It appears that they are now growing the brand architecture. For instance, the Burberry Prorsum range barely uses the check at all. They are using elements of their identity to create, ultimately, something that is much richer.”

The future looks bright for Burberry as for other luxury brands, says Liddell. “A lot of the brands have done well to withstand fairly adverse macroeconomic conditions in the last four years,” he said. “This is the first year where things have been looking a lot brighter for the luxury brands. We are also seeing emerging growth from markets like China and India, and these locations will only add to the opportunities for luxury retailers.”