I have never really believed the old saying that all publicity is good publicity. Surely mud sticks eventually?

Yet for the time being at least, Burberry appears to be surviving the negative headlines that surrounded the controversial decision to close its 60 year-old factory in the South Wales Valleys with the loss of 300 jobs.

Despite a high-profile and star-studded campaign to persuade the luxury British brand that it should stay in Treorchy and not switch polo shirt production to China and elsewhere, together with the months of bad PR it endured, Burberry has revealed a sales increase.

But perhaps the most telling figures released by the clothing brand is the revelation that it will take more four years to recoup the cost of the closure. Even then, annual cost savings will be £1.5m a year – less than 1% of group operating profits.

Burberry justified closing what many analysts stated was a profitable factory in South Wales by claiming it was “not financially viable”. The company maintains that “better-quality goods” could be produced cheaper elsewhere.

Does less than 1% of profit really add up in the long run?

There are other issues that could be addressed regarding Burberry’s decision.

For example, can a company continue a hard sell based around the claim that it is “a luxury brand with a distinctive British sensibility” despite only operateing two factories in the UK with production spreading out around the world?

Equally, will customers put up with this approach from one of their “own” brands?

Given the latest figures released by Burberry, the answer to both appears to be a resounding and rather predictable “yes”.

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One response »

  1. Dave On Fire says:

    UK corporate law obliges Burberry to put the interest of its shareholders first. By not moving, it would deny them a profit increase (even if it is a relatively small one) and that would be illegal. In the U.S., Henry Ford was taken to court (twice, I think) under the equivalent law for making better cars and paying higher wages than was strictly necessary. He lost.

    Of course, image and marketing are very important to such a brand, so if Burberry thought that it’s UK-based factories were what helped it sell then it could have stayed. Clearly, it thought otherwise – understandable, since delocalisations and the decline of industry have been all around us for decades, and (lamentably) consumers aren’t known for paying too much attention to the origins of their shopping.

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