Burberry has bought out its Chinese business partner for £70m as the luxury brand pushes through a restructuring plan to keep a tighter rein on its global image.
Chief executive Angela Ahrendts said the move was in keeping with Burberry's aim of "unifying the brand" famous for its black, tan and red check. China was an "exciting" market, with the deal, which takes in 50 stores in 30 cities, providing a platform for expansion in a "high-growth luxury region".
Ahrendts's predecessor, Rose Marie Bravo, is credited with reinventing what was once a dowdy British trenchcoat-maker as a global luxury brand. She instigated the slow process of buying out its licence holders around the world and Ahrendts has continued with it since taking over in 2006. In February Burberry, whose glamorous campaigns are fronted by Harry Potter actress Emma Watson, announced the closure of its Spanish business, which made a cheaper clothing line sold in stores such as El Corte Inglés.
To persuade the fashion jetset to buy its expensive handbags such as the alligator skin "Warrior", with a price tag of £13,000, or its £200 cashmere snoods, which were one of last winter's bestsellers, Burberry has cracked down on the counterfeit goods being sold overseas and on the internet. It has also begun using its trademark check more subtly, after its success backfired in 2005 when former soap star Danniella Westbrook and her baby were snapped dressed from head to toe in it and football fans started sporting it on the terraces.
The British brand has been on sale in China for 20 years through a franchise partnership with Kwok Hang Holdings and Ahrendts said it was an "optimal time" to take the business in-house. The Chinese chain, which includes nine stores in Beijing and four in Shanghai, made an operating profit of £14m on sales of £75m last year. "We will accelerate growth by further capitalising on nearly 20 years of market presence and our high brand awareness in China," she added. Burberry plans to open another 10 stores in the region this year.
The deal is expected to boost next year's profits by some £20m, and news of the acquisition saw Burberry's shares close at 799.5p, up 9p.
"This will allow Burberry to ensure that the brand is presented to consumers in a consistent fashion," said Evolution Securities analyst Dennis Weber. "Financially the deal is excellent."
