It issued an unrelated profit warning last month.Ĭiti estimates the perfumes move could dilute earnings by about 3-5 percent in 20, but says that if Burberry is able to achieve best-in-class operating margins of 20 percent in fragrances then it would largely offset the start-up costs.īurberry thinks it can beat Interparfums and speed up growth of a perfume business that currently generates about 210 million euros a year in sales for Interparfums, an amount equivalent to about 9 percent of Burberry’s revenues. The 156-year-old British company, known for raincoats lined with a distinctive camel, red and black check pattern, said on Thursday it would give more financial details on the impact of the perfume move when it publishes interim results on November 7. There are already signs that it may have underestimated the challenge: it has extended its contract with Interparfums IPAR.PA to March 31 from its initial end date of December 31. That could potentially change the structure of the industry, reducing the influence of specialist fragrance companies like Interparfums, Coty and L’Oreal, which pay royalties to brands while logging the sales of branded scents on their own books.įirms will be eager to see if Burberry can handle the business itself.
“Rivals might do the same if they have the capability to do it.” “Burberry’s move will be closely watched,” said Fflur Roberts, global head of luxury goods at Euromonitor. If it succeeds, it could be copied by rivals such as Prada 1913.HK, whose scents are made by Spain's Puig, and Gucci PRTP.PA, whose fragrances come from Procter & Gamble PG.N.
“Fashion and beauty are different industries,” says Thomas Chauvet, luxury analyst at Citi, who sees the move as potentially costly and a management distraction at a time when the luxury industry is entering a potential global slowdown.īurberry said it saw big potential in the perfume and cosmetics sector, and was inspired by market leaders Dior and Chanel, long among the few to run their own perfume businesses. Many analysts reckon it will be a difficult task. Like most luxury firms, the British brand licenses its perfume business, in this case to Interparfums IPAR.PA, which also sells scents for an array of other names, from shoemaker Jimmy Choo to penmaker Montblanc.īurberry announced on Thursday that it was taking the business in house, becoming the first big luxury brand in at least a decade to do so. PARIS (Reuters) - Burberry hopes it can gain better control over its brand and eventually a bigger slice of profits by running its own perfume business, a big gamble that could change the structure of the luxury goods industry if others follow suit.
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