Luxury company BurberryGroup has moved to shore up its presence in the Middle East with the formation of a joint venture covering parts of the Middle East with its longstanding franchisee, the Jashanmal Group.
The joint venture has created a new company, Burberry Middle East, which will be headquartered in Dubai. Burberry Middle East, according to a press release, will manage all Burberry retail and wholesale distribution within the UAE markets including Dubai and Abu Dhabi, as well as Qatar, Oman and Kuwait under a 15-year agreement.
The joint venture, according to the statement, will enable Burberry and Jashanmal to capitalise more quickly on opportunities in parts of the Middle East while increasing investment in this proven region. Year-to-date comparable store sales in these countries have increased by over 40 per cent, demonstrating the growth potential of the market.
What it didn’t say was that the luxury good market in the West is probably in for a very rough few years as banks lay off people like there is no tomorrow, access to credit virtually evaporates and even the super rich start to worry about tomorrow. Japan is now officially in recession, following on from Germany, the UK and the US, which means that all the old certainties have disappeared and the focus on the oil-rich Middle East will intensify.
However, a number of banks in the Middle East have begun to tighten up on the credit terms they are offering and a number have raised the minimum wage required by certain expats to be able to avail of credit, so there is probably a decent chance that even those who have come to the region in search of greener pastures will find it tougher than expected. Equities markets have crashed and burned and a number of banks have been stung by the fallout from subprime and toxic derivatives products in the US. The real estate market in the Middle East could also be up for a correction, according to a number of banks.
The first Burberry store in the Middle East opened in 1997 in Dubai under a franchise agreement with Jashanmal. There are currently eight stores in the joint venture, with a further four planned for the current financial year. Of these, two will be dedicated childrenswear stores, a product category which is a key growth area for Burberry.
Burberry Middle East has recently opened its largest store in The Dubai Mall. This flagship store carries both Burberry Prorsum and Burberry London Collection ready-to-wear and accessories. It is the first time that Burberry Prorsum menswear has been available in the Middle East.
The gross assets of the retail and wholesale operations of Burberry Middle East are £7 million.
Burberry Middle East stores are located in Dubai (Burjuman, City Centre Mall, Mall of the Emirates, The Dubai Mall); Kuwait (Arraya Center, Marina Mall); Abu Dhabi (Marina Mall) and Qatar (Villagio Mall).
At 30 September 2008, Burberry had 102 retail stores globally, with 250 concessions, 44 outlets and 84 stores operated under franchise.
Burberry, which is headquartered in London, was founded in 1856 and is listed on the London Stock Exchange.
Jashanmal opened its first store in 1919 and built operations in Kuwait, Bahrain, Dubai and Abu Dhabi over the following decades.
Its retail division operates a chain of seven department stores and various international franchises. In 1964, Jashanmal’s wholesale division was created. This division is responsible for the distribution of a number of major international brands to 2,500 retailers in the United Arab Emirates, 500 in Kuwait and over 100 retailers in Bahrain.
Jashanmal has experience across luxury and premium fashion, perfume and cosmetics brands, as well as a range of consumer goods in the Middle East.