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Luxury fashion label Burberry is teaming up with Coty as it seeks to expand into the global beauty market.
Coty is one of the world’s leading beauty companies, with brands including Rimmel and Clairol.
In an announcement on Monday, Burberry said it would take advantage of Coty’s beauty expertise to “accelerate” growth in its fragrance and make-up business, which has struggled to meet targets.
In November Burberry took a £26.1m writedown charge for the entire value of its beauty licences, saying it expected to generate lower than expected revenues up to December 2017.
Burberry said it would benefit “from Coty’s deep beauty industry expertise and first-class global distribution”. The partnership will start in October.
Shares in Burberry climbed after the announcement, and at publication time it was the second-biggest gainer on the FTSE 100, up 1.3 per cent to £17.47.
Christopher Bailey, Burberry’s chief executive, said:
We are delighted to partner with Coty, a world leader in luxury fragrance and make-up.
Working with a global partner of their scale and expertise will help drive the next phase of Burberry Beauty’s development and position this business for future growth.
Further, the combination of the upfront payments and ongoing royalties is financially attractive and is expected to provide an accretive impact to our earnings from FY 2018/19.
Equity analysts at UBS said the Burberry was its “top pick in European luxury” stocks.
“We believe there is more upside to productivity and cost savings than the market is currently willing to attribute credit for”, said UBS.