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Global|Burberry's Reasons Ending the Destroying of Unsold Products

Sep 14, 2018.Ichiro KumegawaLondon, GB
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From BURBERRY Official Site

On September 6th, Burberry CEO Marco Gobbetti announced the start of their sustainability act by stopping the destruction of their unsold products, use in animal fur, and reuse leftover leather scraps for their strategic means. The company is replacing creative director Christopher Bailey with Riccardo Tisci with the first collection shown on September 17 at the London Fashion Week, but before that, the announcement of its declaration on sustainability was done beforehand.
Last year, the company has stated the amount of disposed clothing items, accessories, perfumes, etc. which equated to 28.6 million pounds. Less than 1% from the annual sales lead to 433 million pounds, but from the era of consciousness, the recent commitments on sustainability and ethics amounts to a "wasteful use of ridiculous resources" from the accusations of environmental organizations. Unsold items of luxury brands such as handbags and accessories are sold in the next season as well. This so-called "carry sales" items are often influenced by trends from left to right and are presented at bargains (there are many brands that don’t carry this out, but bargains occur at least once). In fact it’s the norm to confiscate them under the presence of tax officials. The amount of confiscation is treated as a reduction of inventory assets from the balance sheet. Burberry's net sales in the fiscal year ending March 31, 2018 amounted to approximately 2,733 million pounds on the same level as the previous year. Net profits rose 5% year on year to 467 million pounds with net profit margin at 15.2%. The operating profit margins are close to 30%, and if luxury brands adopts the repeated price cuts like any other regular brands by selling at outlets or bargains, it lowers the prestige that it would be much easier and faster by simply confiscating them, which most luxury brands are currently doing. But listed companies such as Burberry must disclose a fair amount of information and are therefore, likely to be accused by environmental organizations. In this case, it’s declaration of becoming an active participant of a sustainable company does comes with merits for the newborn Burberry. Sooner or later, luxury brands without a sustainable attitude won’t make it to the listing any longer. For example, brands like Chanel who’s not listed and earns half of the sales from its clothing line will face difficulty. It’s unlikely you’ll find a Chanel tweed jacket been given to a less privileged girl in Africa.
The word ‘sustainable’ will come with various challenges for luxury brands that are profiting.