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Big Plans for Burberry

Burberry is poised to ramp up its retail presence in the U.S., boost its accessories business and leverage its brand name worldwide.

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LONDON — Burberry is poised to ramp up its retail presence in the U.S., boost its accessories business and leverage its brand name worldwide, Angela Ahrendts said in her debut presentation Thursday as the company's chief executive officer.

Ahrendts, who joined Burberry in January and officially took up her post this week, said she wasn't looking to make major changes but to take the business to the next level.

"This is chapter 151 of the Burberry brand," said Ahrendts, referring to the company's 150th anniversary celebrations this year.

"I'm not writing a new novel, and I'm not repositioning the brand," she told a handful of reporters in the slick accessories showroom at Burberry's headquarters here. "In fact, I love the positioning of the brand. I love being the opening price point on a high-end street, there alongside Gucci and Louis Vuitton."

Ahrendts was flanked by Burberry creative director Christopher Bailey and chief financial officer Stacey Cartwright. The three sat side by side while shots of the fall ad campaign flickered on a screen above their heads.

Ahrendts said the company will focus on growing its retail operations; building the accessories business, which accounts for 25 percent of sales, and consolidating its internal operations and brand image worldwide.

The U.S. is one of Burberry's fastest-growing markets, generating 24 percent of overall sales, but it still offers enormous potential, she said.

In the 2005-2006 fiscal year, Burberry's global turnover rose 3.8 percent to $1.4 billion from $1.3 billion.

"We plan to invest aggressively in our underpenetrated markets, and we are underpenetrated in the U.S.," said Ahrendts. "While we've opened up a whole southern belt of retail stores — in Florida, Southern California, Dallas and Houston — there's still the center of the country, and the Northeast. And we don't even play in Canada — there are no stores there."

Ahrendts added her team was exploring the use of different retail formats in growing markets. She said there could be casualwear stores in Kansas City or Columbus, Ohio; a men's wear-only store on Wall Street, and nonapparel stores in airports.

Cartwright said capital expenditure in the current fiscal year would be 50 million pounds, or $92 million at current exchange, up from 35 million pounds, or $64 million, in the previous year. Much of that, she said, would be funneled into store openings in the U.S.

"Our brand recognition there is huge, and the economics work for us. If we go into a mall, for example, the landlord offers to pay for 50 percent of our fit-out costs," she said.

There are 36 Burberry retail units in the U.S., and Cartwright said that number easily could jump to 50 in the short term and "quite a lot higher" in the future.

Burberry plans to pump up retail space this year by at least 10 percent, mostly in the U.S. and Asia, which Ahrendts has identified as another high-growth market. She pointed to China, where there are already 35 Burberry stores, and said there was still potential there.

Ahrendts said Burberry increasingly would be "acting like a retailer," rejiggering the flow of goods into its stores to suit consumers' needs and thinking like a final customer rather than a wholesaler. To wit, the Prorsum line, which shows on the Milan runway, now will have eight in-store drops a year rather than three.

Ahrendts was quick to add, however, that wholesale sales remained a "critical and vital" part of the business.

Cartwright said that, thanks to Project Atlas, the $94 million IT overhaul program, Burberry within the next six months will have up-to-the-minute data on global sales and stock metrics. "We will be able to measure sales performance on a global basis," she said.

Accessories are another major source of growth. They currently generate 25 percent of sales, and the plan is to take them to 35 to 40 percent in the short term.

"We will aggressively invest to build our nonapparel business. There is a tremendous opportunity for handbags and small leather goods," said Ahrendts. Bailey added that Burberry has only scratched the surface in accessories. "We'll be increasingly experimenting and using the Prorsum runway as our laboratory," he said.

For spring 2007, espadrilles come with five different heels, there are five new sneaker styles and a variety of unisex bags.

"We found that half of all our men's bags are being sold to women," Ahrendts said, adding that Burberry recently created its first "all accessories" mailer, which will go out to customers later this summer.

Another priority is for Burberry to speak, internally and externally, with one voice.

Retail store managers soon will begin tours of duty in different countries so they can learn about various markets; the design and merchandising teams have begun to meet weekly here to discuss the minutiae of collections; Bailey will be talking regularly to salespeople worldwide, and the company will work to create more synergies among the three apparel collections — Prorsum, London and Thomas Burberry — and the nonapparel offer.

In other news, the company will launch the men's version of the Burberry London fragrance next month. Ioan Gruffudd, star of the British TV series "Hornblower," will appear in the campaign.

The company also will be the sole sponsor of the upcoming David Hockney exhibition at London's National Portrait Gallery, which opens in October. Bailey, a huge fan of Hockney's work, said the sponsorship would be yet another event marking Burberry's 150th anniversary.

Other aspects of the anniversary celebration include an "icons" collection of branded accessories, inspired by the archives, and Burberry's hosting of the "AngloMania" event at the Metropolitan Museum of Art.

Ahrendts said she's been enjoying London. "I'm from Indianapolis, Ind., and I never thought I'd be here! It feels exotic," she said. She added that she took the job for a variety of reasons, one of which was Bailey.

"I love him as a person. There's a natural trust and respect there, and I know we'll be writing the Burberry chapters together," said Ahrendts. "In fact, the whole team that Rose Marie [Bravo] built felt right, as well. I feel we have a platform in place to really grow."